Shares in French banks today soared after the government agreed yesterday to invest 10.5 billion euros ($13.76 billion) into the nation’s six largest banks, all based in Paris.
The investment comes from a government rescue package of 36 billion euros ($47.22 billion).
Christine Lagarde, France’s finance minister, stressed that the cash injection is not meant to strengthen banks’ capital but rather to reinforce their capital reserves.
The government will subscribe to subordinated debt instead of common stock, and the loan will not give it any stake in the banks.
Crédit Agricole SA will issue 3 billion euros ($3.93 billion) in debt, BNP Paribas 2.55 billion euros ($3.28 billion), and Société Générale 1.7 billion euros ($2.23 billion).
Additionally, customer-owned banks Caisse d’Epargne, Banque Populaire and Crédit Mutuel will receive 1.1 billion euros ($1.44 billion), 950 million euros ($1.24 billion) and 1.2 billion euros ($1.54 billion), respectively.
Shares in Crédit Agricole opened 7.65% higher than at close Monday.
BNP Paribas saw a 7.37% increase in shares, and Société Générale shares rose 10.72% overnight.
According to Ms. Lagarde, the government anticipates lending the same amount to banks in 2009.
BNP Paribas said in a release that the loan will be non-dilutive for shareholders.
Governments of other countries, including Switzerland, Luxembourg, Sweden, Belgium and Spain, have been taking similar actions to support their banks.
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