PARIS/LONDON Societe Generale's (SOGN.PA) battered shares fell again on Thursday, reversing a strong morning rally, as French banks led volatile European stocks lower on continuing concerns about their outlook.
SocGen shares were 4.5 percent weaker at 21.19 by 6:55 a.m. EDT, adding to the 15 percent drop they suffered on Wednesday in volume 170 percent of average for the past 30 days. The drop came despite vehement denials of problems at the bank. BNP Paribas (BNPP.PA) and Credit Agricole (CAGR.PA) were down a similar amount.
SocGen's bonds were weak from much earlier in the day. Spreads on its bonds due in 2016 had widened by 45 basis points to the benchmark swaps-plus 260 basis points at midmorning. The cost of insuring its debt against default also rose, with 5 year Credit Default Swaps 16 basis points wider at 350 basis points.
On Thursday rumors about a French sovereign debt downgrade, an expanded bailout for Greece that would hurt French banks, and a government bailout of SocGen, pulled shares of France's second-largest bank down in the heaviest volume since the 2008 financial crisis.
SocGen CEO Frederic Oudea dismissed the rumors as "absolutely rubbish" in an interview with CNBC television after the market closed, adding rumors about a downgrade of France's sovereign debt rating were "very strange" and contrary to the reality of the situation.
In an interview with Le Figaro newspaper published on Thursday, Oudea said the bank had come under "a series of attacks" in the stock market.
He added that the bank had not experienced any losses in particular in the past few days and that its results to date were satisfying.
"The market is an echo chamber: it amplifies good news, as well as bad," Oudea told France Info radio. "People are scared, so the tiniest information touches off irrational fears.
"To our clients, we have to tell them that these rumors are baseless and that they can have confidence in Societe Generale. They should not listen to this stuff, which is totally baseless."
This is the latest stumble for SocGen, which was the weakest of the major French banks in Europe's stress tests of its lenders last month.
Investors have speculated it may have to raise about 3 billion euros to reach new global capital standards if the euro zone crisis worsens.
The bank -- still trying to rebuild its credibility after the Jerome Kerviel rogue-trader scandal in 2008 in which it lost 4.9 billion euros ($6.90 billion) -- also issued a profit warning last week.