BANKS:SOCIÉTÉ GÉNÉRALE was the reluctant winner of yesterday's prize for the worst-performing bank stock in Europe.
The shares of France’s number two bank by market capitalisation slumped 15 per cent, rounding out 10 days of European bank bearishness.
There were plenty of rivals challenging for the biggest faller title.
Fellow French lender Crédit Agricole closed down 12 per cent, while BNP Paribas lost 10 per cent.
In Italy Intesa Sanpaolo was off 14 per cent, Monte dei Paschi fell 10 per cent and UniCredit lost 9 per cent.
Bond markets also experienced significant volatility. Although bond prices rallied a little among the French banks, the spreads on the credit default swaps used as insurance against bondholdings widened dramatically.
The swings are the latest in a torrid two weeks for European banks, as investors take fright at any sign of euro-zone weakness.
The key question now is whether there is genuine justification for the latest leg of the sell-off.
In many ways, the grounds appear more imagined than real. SocGen was insisting as much last night. “Société Générale categorically denies with the most extreme vigour the market rumours, all of which were totally unfounded, which affected its share price,” the bank said, calling on regulators to investigate trading patterns.
SocGen stressed its “very solid financial structure and robust business model”, which would allow it “to cope with the current turbulent environment”, although the bank did warn on profits last week.
The rout focused on France’s banks seems to have been prompted largely by rumours that France was about to lose its AAA sovereign debt rating.
Jitters were heightened by a suggestion in the UK’s Mail on Sunday – which the paper later retracted and apologised for – that SocGen was on the brink of failure. – (Copyright The Financial Times Limited 2011)
