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Big banks in France fear new Hollande regime

Fabio Benedetti-Valentini Paris

France’s biggest banks – BNP Paribas, Société Générale and Credit Agricole – face higher taxes and may have to split off some of their riskiest operations after François Hollande was elected president.

Hollande, who called finance his “greatest adversary” during the campaign, had pledged he would force banks to split retail and speculative operations, impose a tax on all transactions and increase the levy on bank profit by 15 percent.

“I fear the bank bashing will rise again with Hollande,” said Peter Braendle of Zurich-based Swisscanto Asset Management.

Hollande’s measures would come as Europe’s debt crisis rears its head again after voters in France and Greece showed a preference for anti-austerity candidates. Hollande, the first Socialist in 17 years to run Europe’s second-largest economy, promised to push for less austerity and more growth, while the new Greek parliament will have three anti-bailout parties represented.

Credit Agricole, which owns unprofitable Athens-based consumer-banking network Emporiki Bank of Greece, tumbled as much as 6.7 percent in early trade and was 3.4 percent lower at E3.52 (R35.41) at 1pm in Paris. Société Générale, which fell as much as 4.5 percent, was 1.1 percent higher at E17.48 and BNP Paribas, which slid as much as 4.1 percent, was up 1.3 percent at E29.37.

Hollande defeated President Nicolas Sarkozy on Sunday with about 51.6 percent of the vote. He will have to come to grips with resurfacing worries over Europe’s three-year-old debt crisis after Spanish unemployment hit a record and as Greek political leaders struggle to form a government.

French banks held $620 billion (R4.8 trillion) in private and public debt in Greece, Portugal, Ireland, Italy and Spain at the end of December, the highest such holdings by foreign lenders, according to the Bank for International Settlements.

France’s largest lenders are reducing their balance sheets by at least E300bn after booking write-downs on Greek sovereign debt and enduring a liquidity crunch last year.

“The black spot is Greece; Hollande’s win was already discounted,” said Gregory Moore of Montsegur Finance in Paris. “Hollande’s wiggle room will be limited. He can’t afford having the financial system up in arms against him because he needs it to buy French sovereign debt.”

Hollande promised to reform France’s banking industry, built around the so-called “universal” model with operations stretching from consumer banking to capital markets. The effort may cut earnings of BNP Paribas, Société Générale, Credit Agricole and Natixis.

The four banks might see their 2013 profit dented by 10 percent under Hollande’s plan, said Jean-Pierre Lambert, a London-based analyst at Keefe, Bruyette & Woods.

Speaking before the runoff between Hollande and Sarkozy, Société Générale chief executive Frederic Oudea said he was “confident to convince any government” that the French universal banking model was “the best” for economic growth.

“I haven’t heard any idea of spin-off,” Oudea, who is also the head of the French Banking Federation, said earlier this month. “The idea is to ensure that the taxpayer is not exposed to any speculative activity. That’s the case in France. There’s not a single euro of deposit which is financing any speculative activity.”

Société Générale spokeswoman Nathalie Boschat declined to comment as did representatives of BNP Paribas and Credit Agricole. – Bloomberg

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