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France’s banking sector: Facts & Figures

Updated December 2020 – For earlier editions of Facts & Figures click here

The year 2019 was marked by political and economic uncertainties (protectionist tensions, Brexit) that weighed down not only on trade, but also on corporate investment and world growth more generally. In this context, the economic activity in France slowed down in 2019: GDP growth reached +1.5% after 1.8% in 2018. Exports slowed down more than imports, so that the contribution of foreign trade balance to GDP growth was negative. However, household consumption and investment accelerated. Household purchasing power gains were more dynamic than their consumption: their savings rate reached 15.0% in 2019 (after 14.5% in 2018).

The banking sector is one of France’s six main economic assets, according to the OECD. As of January 2020, 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 accounted for 4.0% of total value added in France in 2019, of which approximately 60% for the banking industry. The banking industry employed 360,000 people at the end of 2019, representing 1.8% of the private workforce in France, and recruiting 44,000 people in 2019. Their network of bank branches providing access to banking services and cash is among the densest in Europe (one bank branch for 1,870 inhabitants in 2019 versus 2,655 in the eurozone).

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 capitalization of French banks. The aggregate common equity Tier 1 capital (CET1) of French banks was 14.4% at the end of 2019.

The six largest French banking groups, which operate according to the ‘universal banking’ diversified model, reported a strong financial performance in 2019. Total net banking income reached €150.6 billion (up 2.0% compared to 2018), of which retail banking accounted for 65%. Total group net income remained stable at €25.6 billion.

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 December 2019, outstanding loans to the economy stood at €2,545 billion, up 5.8% year-on-year.

Outstanding loans to businesses stood at €1,062 billion at the end of December 2019, up 5.1% year-on-year, while the euro area rose by 2.6% on average. Outstanding loans to investment were the most important segment, at €763 billion (up 6.3%).

Loans to SMEs accounted for 42% of total loans granted to businesses in December 2019 and rose by 5.3% year-on-year. Access to credit is high: 97% of SME investment loans and 89% of cash credit applications were accepted in the fourth quarter of 2019. Credit demand remains almost stable: only 22% of SMEs sought an investment loan and 6% requested cash credits.

French banks also actively finance French consumers. Outstanding household loans reached €1,302 billion at the end of December 2019, up 6.6% year-on-year. Most household loans were housing loans, representing €1,079 billion (up 6.8% year-on-year).

Lending activity remains both dynamic and sound. The level of non-performing loans is very low (2.5% at the end of December 2019) as the cost of risk (as a proportion of average total assets it declined from 0.41% in 2009 to 0.11% in 2019).

Diversification of corporate financing is developing in France. Markets account for 37% of corporate financing, compared with 30% in 2009. French banks also have a large and diversified 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. 3.4 billion contactless payments were made in 2019 (after 2.1 billion in 2018).

It is worth mentioning a French Initiative which is a world first, pursuant to which the large French banks have decided to exit the coal sector (with firm exit dates) and have published an indicator that will be updated annually to evidence such exit, as well as the related methodology in order to be as transparent as possible. As of 2019, their exposure to coal amounted to €2.3 billion, representing less than 0.2% of their corporate portfolio.

Such publication has been made on the website of the “Observatory of Sustainable Finance” that tracks all the French financial institutions progress on Sustainable Finance, following a public declaration on July 2nd 2019, involving all the French financial institutions, the French Government and the French financial regulators (AMF and ACPR) who will oversee the reality of the commitment made. Such multistakeholder approach is also unique in the banking world.

Contributor: Hugo Valla hvalla@fbf.fr