SocGen, BNP Drop in Paris on ‘Tail Risk’ From Euro Debt Crisis

Societe Generale SA and BNP Paribas SA, France’s largest banks, fell in Paris trading after UBS AG cut its price targets on the stocks, citing “tail risk” from political delay in tackling the euro-region debt crisis.

Societe Generale, France’s second-largest bank, tumbled as much as 13 percent and was down 8.4 percent at 19.31 euros by 3:25 p.m. in Paris, giving the company a market value of 15 billion euros ($20 billion). BNP Paribas, the country’s biggest lender, declined 5.6 percent at 29.40 euros.

“Markets continue to lose confidence and funding becomes more strained,” London-based UBS analyst Omar Fall wrote in a note today. “Although there is value under most scenarios for SocGen and BNP, tail risk of a disorderly policy decision will be priced in until the macro situation is resolved.”

UBS cut the rating on Societe Generale to neutral from buy and reduced its price target by 40 percent to 21 euros. While UBS retained its neutral rating on BNP Paribas, its price target was cut 14 percent to 31 euros.

European leaders are turning their focus to the next steps to stem the region’s debt crisis after German lawmakers approved an expansion of the euro-area rescue fund’s firepower. With the European Commission now expecting the overhauled 440 billion- euro European Financial Stability Facility in place by mid- October, euro finance chiefs will next week discuss accelerating enactment of a permanent rescue fund that provides more capital and a tool for managing defaults.