Bank denies rumours of slump

Societe Generale, France's second-largest bank, denied "all market rumours" and asked the nation's market watchdog for an investigation after speculation that France's creditworthiness was in doubt sent its shares tumbling.

The lender's performance in July and early this month shows it will be able to post "solid" results in the future, Paris- based Societe Generale said yesterday.

The bank asked France's Autorite des Marches Financiers to open a probe into the origin of speculation that is "extremely harmful to the interests of its shareholders".

Britain's Daily Mail newspaper has published an apology for an incorrect Monday report that said Societe Generale was in a "perilous" state.

Societe Generale led European bank stocks to their lowest since the aftermath of the credit crisis yesterday, tumbling 15 per cent to €22.18 ($38) in Paris, the biggest drop since October 27, 2008.

France's top credit rating was affirmed by all three major rating companies as speculation that Europe's debt crisis would spread to the region's second-biggest economy pushed the cost of insuring its government debt against default to a record.

"There is no indication whatsoever that France would waver in its determination to honour its obligations," Dirk Hoffmann-Becking, an analyst at Sanford C. Bernstein in London, said in a report to clients.

"The resilience of the French banks against a freeze in the short-term funding market is very high," he said, predicting that the sell-off in French banking shares "should be short-lived".

France's AMF said it was watching to ensure "good functioning" of markets with an eye toward financial shares in particular. "Like in each period of turbulence, the AMF is vigilant," the regulator said.

Societe Generale says it has low exposure to peripheral European sovereign debt and has fulfilled "almost all" of its financing plan for this year.

The company said this month it may miss its 2012 earnings target after second-quarter profit fell 31 per cent because of a writedown on Greek government debt.

Societe Generale CEO Frederic Oudea defended the lender and said speculation that France's creditworthiness was in doubt was "absolute rubbish". "I think the situation is really under control in France and in good hands," Oudea said.

French bonds are the most costly AAA government securities to insure as investors raise bets that top-rated euro-region nations may be next in the firing line after the United States was downgraded by Standard & Poor's.

- Bloomberg