France's top banks, BNP Paribas, Société Générale and Crédit Agricole, have seen €39bn wiped off their valuations since the start of September as investors worry about political uncertainty and the country's fragile economy. The three lenders reported higher third-quarter profits and matched or beat analysts' expectations, helped by booming equities trading and higher interest rates boosting their French retail banking businesses. Their share prices, however, did little to respond.
By Friday, any post-earnings gains had been erased. Crédit Agricole, the last of the three to report, warned about the economic outlook just as official figures showed France's GDP unexpectedly contracted 0.1 per cent in the third quarter. Chief executive Olivier Gavalda said investment project requests in France and the wider Eurozone were slowing, adding that there was "a strong chance credit demand will be slower." Crédit Agricole shares fell 2 per cent on Friday and have lost almost a fifth of their value since early September.
The broader problem is investor concern about France itself rather than the banks. Emmanuel Cau of Barclays said the worry is "exposure to France as a broader theme," with no clear catalyst to restore confidence. In October, France's long-term borrowing costs reached 5 per cent for the first time in more than two decades, amid worries over the fiscal deficit, next year's presidential election, the 2027 budget and violent street protests. Even BNP Paribas, which earns less than 10 per cent of its pre-tax profit in France, has shed more than 17 per cent since September.
Analysts at JPMorgan do not expect investors to return to French assets until the main event risks pass. The banks reported broadly stable cost of risk and said they had pre-funded some of their 2027 financing needs. Oddo BHF's Bruno Cavalier noted that European banks are far less exposed to sovereign debt than during the Eurozone crisis 15 years ago, though "it's hard to completely erase the sovereign-banking nexus."
Source: Financial Times Companies · Summarized by HeadlinesBriefing