French banking stocks fell sharply on Monday as investors reacted to a surprise sovereign credit downgrade by S&P Global and a costly legal defeat for BNP Paribas (EU:BNP).
Market pressure mounted after a jury awarded approximately $20 million to three plaintiffs in a class action lawsuit accusing BNP Paribas—Europe’s largest bank by assets—of helping finance genocide in Sudan. According to Bloomberg, the verdict could push the lender to settle with other plaintiffs in the ongoing case.
As of 09:49 GMT, shares of BNP Paribas were down more than 10%, while Crédit Agricole (EU:ACA) and Société Générale (EU:GLE) slid 3.5% and 2.5%, respectively.
On Friday, in an unscheduled update, S&P Global cut France’s credit rating to “A+/A-1” from “AA-/A-1+,” citing deep political uncertainty. The downgrade followed a volatile week in which Prime Minister Sébastien Lecornu suspended a controversial pension reform plan and survived two parliamentary no-confidence votes.
“Despite this week’s submission of the 2026 draft budget to the parliament, uncertainty on France’s government finances remains elevated,” S&P Global wrote in its statement.
The agency added, “While, in our view, the 2025 general government budget deficit target of 5.4% of GDP will be met, we believe that, in the absence of significant additional budget deficit-reducing measures, the budgetary consolidation over our forecast horizon will be slower than previously expected.”
S&P warned that the fiscal turmoil is likely to weigh on both investment activity and private consumption. The agency also noted that passing a 2026 budget could help clarify France’s plans to manage its rising debt burden, projected to reach 121% of GDP by 2028, up from 112% at the end of last year.
“The survival of the Lecornu government removed near term risk of political instability, but it does not address fiscal concerns,” analysts at Jefferies Group LLC said. They also pointed to a “high risk” of a similar downgrade by Moody’s Investors Service, which could prompt institutional investors to scale back exposure to French assets.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.
Some portions of this content may have been generated or assisted by artificial intelligence (AI) tools and been reviewed for accuracy and quality by our editorial team.
Leave a Reply