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France’s banking sector: Facts & Figures

Updated September 2019 – For earlier editions of Facts & Figures click here

After a strong year in 2017, GDP growth in France slowed to 1.7% in 2018, from 2.4% in 2017. Temporary factors, such as strikes in the transport sector weighed on French activity at the beginning of 2018. Economic activity slightly accelerated in the second half of 2018 but was impacted by social protests at the end of the year. In this context, household consumption stagnated in the fourth quarter despite several fiscal measures in favour of purchasing power adopted before the social protest movement began. Although less vigorous than in 2017, investment (by both corporates and households) remained dynamic. In the near future, GDP growth is set to decrease, while remaining above potential. Government deficit and debt will stay at a high level in 2019, forecasted by the French Government at -3.1% (above the 3% Euro area threshold) and 98.9%, respectively.

The banking sector is one of France’s six main economic assets, according to the OECD. As of January 2019, the French banking industry numbered 340 banks. According to the Financial Stability Board, four French banks are among the eight Euro area Global Systemically Important Banks (G-SIBs). Financial activities account for 3.9% of total value added in France, of which approximately 60% is accounted for by the banking industry. The banking industry employed more than 362,800 people at the end of 2018, representing 1.9% of the private workforce in France, and recruiting more than 42,300 in 2018, while overall banking employment decreased at a moderate pace (-1.0% in 2018).

The results of the combined asset quality review and stress testing, conducted by the European Banking Authority and the European Central Bank, demonstrated the high level of capitalisation of French banks. The aggregate common equity Tier 1 capital (CET1) of French banks was 13.6% at the end of 2018.

The six largest French banking groups, which operate according to the ‘universal banking’ diversified model, reported a strong financial performance in 2018. Total net banking income reached €147.7 billion (up 0.9% compared to 2017), of which retail banking accounted for 66%. Total group net income was €25.5 billion (up 6.8%).

Banks finance business development as well as individuals very dynamically in France. Credit is one of the main drivers of growth. At the end of April 2019, outstanding loans to the economy stood at €2,458 billion, up 6.2% year-on-year.

Outstanding loans to businesses stood at €1,307 billion at the end of April 2019, up 6.6% year-on-year, while the euro area rose by 2.7% on average. Outstanding loans for investment was the most important segment, at €734 billion (up 7.0%).

Loans to SMEs accounted for 42% of total loans granted to businesses in April 2019 and rose by 6.6% year-on-year. Access to credit is high: 95% of SME investment loans and 88% of cash credit applications were accepted in the first quarter of 2019. Credit demand remains almost stable: only 23% of SMEs sought an investment loan and 7% requested cash credits.

French banks also actively finance French consumers. Outstanding household loans reached €1,244 billion at the end of April 2019, up 6.3% year-on-year. Most household loans were housing loans, representing €1,026 billion (up 6.2% year-on-year).

The French lending model is both dynamic and sound. The level of non-performing loans is very low (2.8% at the end of December 2018) as is the cost of risk (€7.9 billion in 2018, down 6.4% year-on-year).

Diversification of corporate financing is developing very rapidly in France. Markets account for 37% of corporate financing, compared with 30% in 2009. French banks also have a large and efficient investment banking activity.

French banks’ investments, innovation and leading role in the fintech ecosystem make them the natural leaders of the digital financial movement in France. Banking applications for smartphones and tablets rank third among the most used by French people, after the weather forecasts and social networks, according to survey company Opinion Way. More than 2.1 billion contactless payments were made in 2018 (compared with 1.2 billion in 2017).

Contributor: Timothée Waxin twaxin@fbf.fr