Fitch downgrades 5 European banks
Baku, December 15 (AZERTAC). Fitch Ratings on Wednesday downgraded its investment-grade ratings on five major European commercial banks, including French lender Credit Agricole S.A. (CRARF.PK, ACA.PA), citing the stronger headwinds facing the banking industry as a whole, Nasdaq reports.
Separately, Credit Agricole said it would cut 2,350 jobs and expects to report a loss for 2011, amid the deepening Eurozone debt crisis.
Fitch said it downgraded France`s Banque Federative du Credit Mutuel and Credit Agricole, Finland`sOP Pohjola Group, Denmark`sDanske Bank A/S (DNSKY.PK) and the Netherland`s Rabobank Group.
The ratings agency downgraded its long-term issuer default ratings on Banque Federative du Credit Mutuel, Credit Agricole and OP Pohjola Group to `A+` from `AA-`. It lowered Danske Bank to `A` from `A+`, and the Rabobank Group to `AA` from `AA+`.
The outlook on Danske is negative, while the other four banks have stable outlooks. Fitch also said that all the banks were taken off watch for possible downgrade.
Fitch said that exposure to troubled Eurozone countries through their subsidiaries was a direct consideration in the downgrades of Danske Bank and Credit Agricole, while the eurozone crisis had negative indirect consequences on the other three banks.
Further, Fitch said all the five banks have continued to improve their capital and liquidity positions, which is positive for credit ratings. However, the general developments in the global economy and a notable shift in market confidence towards the banking sector as a whole outweighed the positives and were the primary drivers for the downgrades, the ratings agency added.
The banks also have leading franchises in their domestic retail and commercial banking markets, which puts them in more robust positions in the medium term than banks with concentrations in other areas of the financial services industry, Fitch said.
According to Fitch, questions over how the Eurozone crisis will be resolved and austerity measures taken to varying extents by European governments will affect commercial banking negatively, particularly in Southern Europe and Ireland.
Separately, Credit Agricole said it would cut 2,350 jobs, reflecting the continued uncertainty surrounding the Eurozone debt crisis. The job cuts include 1,750 at the corporate and investment bank unit and 600 at the consumer finance unit.
The bank also plans to scale back activity in the corporate and investment banking unit, which will include exiting from 21 of the 53 countries where the services are offered.
France`s third-largest bank by assets said it expects to report a loss in 2011 after writing down 2.5 billion euros, or $3.25 billion, primarily related to its investment banking division. However, the company projects Crédit Agricole Group to post a profit for 2011.
Further, the bank said its board of directors will propose not paying a dividend at the next general shareholders` meeting. The company said the "lack of visibility on the economic and financial climate" do not make it possible to confirm its targets for 2014.
In early November, Credit Agricole had reported a sharp decline in profit for the third quarter, hurt by a significant impairment charge stemming from the euro zone countries` measures to support Greece.
Credit Agricole shares closed Wednesday`s trading in Paris at 4.23 euros, down 0.30 euros or 6.71 percent.
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