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France’s banking sector: Facts & Figures

Updated September 2018 – For earlier editions of Facts & Figures click here

The French economic situation is improving steadily. GDP growth recorded a marked acceleration of 2% in 2017, after 1.1% in 2016. Domestic demand has been the main growth driver in recent years, but signs of a pick-up in exports are appearing for 2018, supported by a stronger external demand and a more dynamic industrial activity in France. Investment (by both corporates and households) is dynamic and supported by improving activity and employment prospects in a context of low interest rates and ample credit supply, as well as economic policy measures (tax reforms have improved corporate margins). The structural reform agenda developed by the government covers a wide range of areas (labour law, education and employees’ training, pension and unemployment regimes, public expenditures and entities) and will contribute to a higher potential growth, as already shown by stronger business climate indicators. Government deficit and debt remain at a high level in 2018, forecasted by the French Government at -2.6% (below the 3% Eurozone threshold) and 96.8%, respectively.

The banking sector is one of France’s six main economic assets, according to the OECD. As of January 2018, the French banking industry numbered 347 banks. According to the European Banking Authority (EBA), three French banks are among the seven euro area Global Systemically Important Banks (G-SIBs). Financial activities account for 4.1% of total value added in France, of which approximately 60% for the banking industry. The banking industry employed more than 366,200 people at the end of 2017, representing 1.9% of the private workforce in France, and recruiting more than 42,200 in 2017, while overall banking employment decreases at a very moderate pace (-1.2% in 2017).

The results of the combined asset quality review and stress testing, conducted by the EBA 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 13.8% at the end of 2017.

The six largest French banking groups, which operate according to the universal banking diversified model, reported a strong financial performance in 2017. Total net banking income reached €146.4 billion (up 0.5% compared to 2016), of which retail banking accounted for 66%. Group net income was €23.9 billion (down 1.9%).

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 March 2018, outstanding loans to the economy stood at €2,314 billion, up 5.5% year-on-year.

Outstanding loans to businesses stood at €974 billion at the end of March 2018, up 5.4% year-on-year, while the euro area rose by 2.2% on average. Outstanding loans to investment were the most important segment, at €689 billion (up 6.4%).

Loans to SMEs accounted for 42% of total loans granted to businesses in March 2018 and rose by 3.5% year-on-year. Access to credit is high: 95% of SMEs investment loans and 85% of cash credits applications were accepted in the first quarter of 2018. Credit demand remains 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 €1,170 billion at the end of March 2018, up 5.9% year-on-year. Most household loans were housing loans, representing €963 billion (up 5.7% year-on-year).

The French lending model is both dynamic and sound. The level of non-performing loans is very low (3.1% at the end of 2017) as is the cost of risk (€8.4 billion in 2017, down 18.0% year-on-year).

Diversification of corporate financing is developing very rapidly in France. Markets account for 39% of corporate financing, compared with 31% 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. Some 1.2 billion contactless payments were made in 2017 (up 102.9% compared to 2016) for a total of €12.4 billion (up 98.6% compared to 2016).

Contributor: Timothée Waxin twaxin@fbf.fr

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