RESEARCH ALERT-UBS starts BNP Paribas, SocGen with buy

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Oct 2 (Reuters) - UBS started coverage of France's three biggest listed banks, BNP Paribas , Societe Generale and Credit Agricole , and said French banks should benefit from their diversified funding streams.

UBS initiated BNP Paribas and Societe Generale (SocGen) with a "buy" rating, and Credit Agricole with a "neutral" rating.

"We regard their (French Banks) capital positions as either relatively comfortable or, in the case of BNP Paribas, supported by strong cash flow generation and minimal exposure to risk assets," analyst Omar Fall said.

The domestic asset quality of French banks is relatively sound in a European context, with such risk as there is coming from their consumer credit divisions, the analyst said.

Fall has a price target of 89.30 euros on the shares of its top pick SocGen, 80 euros on BNP shares and 13.60 euros on Credit Agricole shares.

After the failure of Wall Street bank Lehman Brothers and the bail-out of insurer AIG , which rocked world markets, SocGen and BNP had said that they were well placed, despite fears of further write downs.

The crisis in the banking sector has raised doubts about the viability of various business models, but has served to affirm the universal banking model practised by French banks, Fall said.

"French banks' revenue profiles in corporate and investment banking, biased as they are to equity derivatives and financing, are a key differentiator, while offering a generational opportunity in the new environment to gain market share," analyst Fall wrote in a research note to clients. (Reporting by Arup Roychoudhury in Bangalore; Editing by Himani Sarkar) (arup.roychoudhury@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: arup.roychoudhury.reuters.com@reuters.net)