UPDATE 1-S&P cuts French banks' credit ratings


* Cites economic risks, overheated housing market

* BNP Paribas' counterparty strength downgraded

* SocGen, Credit Agricole keep ratings but outlook cut

PARIS, Oct 25 (Reuters) - Ratings agency Standard & Poor's cut the credit ratings of several French banks including BNP Paribas on Thursday, warning they were becoming more exposed to a potentially protracted recession in the euro zone.

Citing economic risks, including an overheated property market in France, S&P cut its counterparty credit ratings on BNP and two smaller, unlisted banks; it also cut the outlook on 10 banks including Societe Generale and Credit Agricole to negative from stable. BNP declined to comment.

French banks have been slashing their exposure to peripheral euro zone economies, including Greece, over the past year. However, they have some of the biggest cross-border exposures to Italy, which is in recession.

``The economic risks under which French banks operate have increased in our view, leaving them moderately more exposed to the potential of a more protracted recession in the euro zone,'' S&P said in a statement.

``The French housing market is in the process of correcting a build-up in housing prices, although we expect the impact on banks and the overall economy should be relatively limited.''

BNP's rating was cut to A+, from AA-. S&P also cut counterparty ratings on Solfea, a subsidiary of utility GDF Suez , to A-, from A, and on Cofidis, a consumer-credit arm of cooperative bank Credit Mutuel, to BBB+ from A-.

The outlook for these three lenders is negative. S&P also said it had a negative outlook on banks including SocGen, Credit Agricole, Natixis parent BPCE, Credit Mutuel, Banque Postale and RCI Banque, owned by Renault.

The ratings on SocGen and Credit Agricole were kept at A.

Meanwhile, S&P rival Moody's said it had cut mortgage lender Credit Immobilier de France's long-term debt rating to Baa2, from Baa1, and put it on review for further downgrade. The bank was thrown a debt lifeline by the state after it hit a funding crunch and is due to be gradually wound down.

(Reporting by Lionel Laurent; Editing by James Dalgleish)