For several weeks, the largest French banks have seen their share prices rise on the stock market thanks to good results and because central banks are raising their rates. However, the uncertain future of global growth could halt this trend.
Securities of French banks rose by an average of 13%.
Since the start of the war in Ukraine, major French banks have lowered their stock market valuations. However, for a month, many of them have been rapidly climbing the slope and seeing significant increases in the price of their shares: Société Générale rose by 15.5%, Crédit Agricole by 13.2% and BNP Paribas by 10%.
The Euro Stoxx Banks Index includes all European banks. In the last month it increased by 3.1%, much less than the increases recorded by the three largest French banks. These three banks have seen increases of more than 13% on average, per month, over the past month.
The Federal Reserve has already made three rate hikes in July and the European Central Bank has just made its first rate hike. Thus began the performance of the various banks, the reference rate was between 1.5% and 1.7%.
French banks have seen their profits rise since the second quarter. As major US banks continue to grow on the stock market, this momentum hasn’t stopped their profits from plummeting.
BNP Paribas and Crédit Agricole SA made much higher profits and Société Générale recorded lower losses than most people thought. The income statements far exceed what most analysts thought they would be.
Banking analyst Julien Grandjean from the Fitch agency explains that banks’ results in 2022 were excellent, despite macroeconomic uncertainties and recent downward growth forecasts. Many analysts had thought the results would be slower than they currently show, according to Grandjean.
“The growth of French banks affects many of their businesses,” says Jon Peace, an analyst at Credit Suisse. Encouragingly, “the results were driven more by revenues than by the change in loss provisions, which is a more cyclical aspect”.
Consumer credit: a safe bet for banks
Major French banks had a strong impact on results thanks to their retail branch. In particular, consumer loans recorded a sharp increase in the first half of the year.
In the second quarter, French banks achieved excellent results, even record ones. Despite an uncertain global economy, banks have performed well. Much of their success comes from the good performance of their retail branches and they have also been very successful in offering credit cards and mortgages to their customers.
Credit Mutuel bank notes that the money borrowed by its clients to finance their projects has increased to show their support for the recovery. The amount borrowed by consumers has increased by 6.8% in the past six months to reach € 48.8 billion.
At the end of June, Crédit Agricole’s consumer loans increased by 4.9%, bringing total outstanding loans to € 96.6 billion (compared to € 93.9 billion in December). At the BPCE, their joint banking groups increased by 5.8%, bringing total outstanding loans to € 37.4 billion between June 2021 and June 2022.
Other French banks are also not excluded. BNP Paribas saw its outstanding loans rise 4.9% to $ 11.3 billion, while La Banque Postale saw its outstanding loans rise 4% to $ 5.5 billion. Société Générale also recorded an increase in loans, in particular thanks to the immense success of Boursorama (+ 32%).