Banks with local subsidiaries, government-lending exposure most at risk
Banks in France and Germany have the biggest exposure to Greece of non-Greek lenders are also heavily exposed to other potentially at-risk countries, with those firms that operate local subsidiaries or with big local-authority funding activities likely to face the heaviest losses, analysts said.The latest figures from the Bank for International Settlements show French banks have $75.2 billion of exposure to Greek borrowers, while the industry in Germany has an exposure of $45 billion. The U.K. trails a relatively distant third, with exposure of $15.1 billion.
Shares fell heavily across the European banking sector Wednesday as fears over a potential sovereign debt default escalated, with essentially untradeable two-year Greek debt indicating yields north of 30%. Also see Europe Markets.
"The sell-off in Greek bonds is likely to make banks at least consider the valuations of these assets, in our view, so write-downs are potentially possible," said analysts at Nomura in a note to clients.
As major holders of sovereign debt, banks would suffer in any default or debt restructure, but Nomura said it believes Greek exposure is unlikely to be material to valuation for most banks.
"Where there is potential for bigger losses, in our view, are banks that firstly have significant local businesses in affected markets, and secondly banks that undertake local authority funding activities," the broker added.
Among banks with local businesses in Greece are Credit Agricole (FR:ACA 11.07, -0.41, -3.54%) , which dropped 3.7% on the Paris market Wednesday, and Societe Generale (FR:GLE 40.88, -0.18, -0.44%) , which fell 1.1%.
Major local authority lenders include Germany's Commerzbank (DE:CBK 5.99, -0.08, -1.30%) and Belgium's Dexia (BE:DEXB 4.16, -0.08, -1.89%) , which both declined around 2%, though neither has disclosed their exposure, if any, to either Greece or Portugal....MORE
I saw something cross the wire that BNP said their exposure was minimal.
