French banks are weathering the negative interest rate storm better than their Eurozone rivals, thanks to healthier balance sheets and more sustainable business models.
France’s three leading banks - Societe Generale, BNP Paribas and Credit Agricole - have outperformed the continent-wide Euro Stoxx banking index over the past year, and even with economic growth set to falter, they should continue to be the pick of a less than attractive bunch, according to a new report.
BMI Research said the French lenders are much more positioned to soak up the profitability hit from negative interest rates, which squeeze lending margins, since the majority of French lenders charge customers for bank accounts and their mortgages tend to come with fixed interest rates, not ones that track central bank rates.
Analysts added: “Unlike many Eurozone peers, loan growth remains relatively robust” while charges for 85 per cent of currency accounts “will help prop up revenues amid downward pressure on net interest incomes from low interest rates”.
The report continued: “Further bolstering the stability of the sector, no systemically important banks in France are at risk of failure or in need of capital injections. This contrasts to countries such as Germany, Italy and Portugal, where some form of government assistance has or will potentially be needed to prevent the collapse of a major player.”
Nevertheless, challenges are looming for France’s financial sector, with a tense election scheduled for next Spring which could see Marine Le Pen cause a stir and raise the prospect of Nicolas Sarkozy returning to office with his much more sceptical take on France’s role in the EU.