French banks have been among the biggest casualties of the euro crisis. Having emerged from the subprime crisis relatively unscathed, they were ill-prepared when the eurozone's troubles escalated last summer: Too highly leveraged, too reliant on short-term funding from US money-market funds and too exposed to Greece and other peripheral countries, they were forced rapidly to shrink their balance sheets. In the ensuing panic, shares of BNP Paribas and Societe Generale halved in value in a few weeks.

Six months later, their balance sheets are in far better shape. Both banks ended the year with core Tier 1 capital above the European stress-test target of 9% after sovereign-bond exposures were marked to market. BNP Paribas now expects to achieve a 9% core Tier 1 capital ratio on a full Basel III basis by the end of this year. SocGen has shrunk its balance sheet by €48bn in six months, equivalent to 7% of total assets, and cut its exposure to peripheral countries by 60% since the end of 2010 to just €5.4bn.