French Banks Up to Their Ears in Bad Oil and Gas Loans
Feb. 5, 2016 (EIRNS)—As usual, France is hiding the big rats in their banking system. This time it is their exposure to the oil and gas markets that have faced a collapse in prices. Bloomberg's columnist Lionel Laurent has a post, lamenting on the "opaque" data the French banks have revealed so far.
"France's banks, which have long used their profitable consumer banking operations to fund expansion in corporate lending, are among the most exposed to the oil and gas industry."
He cites Jonathan Tyce of Bloomberg Intelligence, who puts the total exposure of the top French banks, including Crédit Agricole, BNP Paribas, Société Générale, and Natixis, at more than €100 billion, with these banks being among the top seven European lenders with exposure to energy companies, and in the top five for metals and mining companies, according to analysts at Nomura.
The percentages of energy loans from these banks to total lending are as follows: Crédit Agricole, 10%; Société Générale, 6%; BNP Paribas, 5%; and Natixis, 7%.
The other problem is that the banks have not set aside any extra capital to cover losses and are not exactly open about their exposure, the quality of their borrowers' collateral, or an any risks posed by the companies they are lending to.
Another black hole on this issue of energy loans is in the Netherlands, which is the center of the oil spot market. Laurent reports that ING Bank alone has a €29 billion energy loan portfolio, accounting for about 14% of its total lending to companies. On Feb. 4 ING issued a statement claiming that it expected to make provisions on €3.8 billion of loans if oil prices remained at the current low levels. It said the other parts of the loan book are "somewhat exposed" to oil price risk. Laurent also laments that ING, too, is being "opaque" about the situation.
Crédit Suisse said yesterday that its net loans to the oil and gas industry totalled $9.1 billion but also signalled that there is nothing to worry about. As for Deutsche Bank, it refuses to disclose its exposure to the energy industry, saying only it was "underweight" relative to the sector.