Moody's says French banks' outlook still negative, cites funding

PARIS, March 25 Mon Mar 25, 2013 4:27am EDT

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PARIS, March 25 (Reuters) - Ratings agency Moody's Investors Service on Monday said it still viewed the outlook for France's top four banks as negative, citing their continued reliance on wholesale funding.

Despite strides made by BNP Paribas, Credit Agricole, Societe Generale and BPCE in increasing their deposits and cutting back their loan books, "wholesale funds at the four largest groups still accounted for 35 percent of total cash balance sheets at year-end 2012, in the upper range amongst peers," the ratings agency said.

In addition, recessionary conditions in large parts of Europe may also hit the banks' loan portfolios, especially given their exposures to Italy and Spain, which Moody's said accounted for 5 percent of total assets and remains "a tail risk for the system."

At the same time, Moody's said it expected the major French banks' profits to bounce back this year from 2012, when several were hit by one-time writedowns.

Equity investors shrugged off the Moody's report, sending French bank shares higher amid overall market gains after deal to bail out Cyprus, averting a threatened exit from the euro zone.

French banks were among the European banking sector's top gainers.

Credit Agricole shares were up 3 percent at 8:26 GMT, Societe Generale shares were 2.2 percent higher, Natixis - BPCE's investment banking and asset management unit - was 3.2 percent higher and BNP Paribas was up 2 percent. (Reporting By Christian Plumb; Editing by Leila Abboud)

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