The financial performance of French banks has weighed heavily on the results recorded by the European banking sector. According to ECB figures, French banks generated profits of €21.5 billion in 2020, compared with €23.5 billion for the eurozone as a whole.
Systemically important" establishments
These figures are partly explained by the "systemic" size of the institutions that make up the French banking sector.
BNP Paribas has revealed that its net income finally fell by 13.5% in 2020, to 7.5 billion euros, due to a rise in the cost of risk. Nevertheless, this performance was still better than analysts' expectations. Group revenues remained relatively stable at 43.3 billion euros.
Meanwhile, Crédit Agricole, another sector heavyweight, reported a profit of 2.69 billion euros for 2020. Here again, the results are better than those expected by analysts, who were forecasting a loss-making 4th quarter. The Group partly offset its cost of risk with higher revenues.
BNP Paribas and Crédit Agricole have combined annual profits of almost 11.8 billion euros, and have therefore made a massive contribution to the results announced for the eurozone as a whole.
Profitability: France widens the gap
The financial performance of French banks cannot be explained solely by their natural weight. France's major banking groups performed better than their neighboring countries, most of which posted significant losses or relatively low profits. Spain, for example, posted net losses of 9 billion euros. Italy also lagged behind, with profits of 474 million euros for the year, as did Germany, which posted a net profit of 1.3 billion euros last year.
Another criterion on which France stands out is return on equity (RoE). Despite a year disrupted by the health crisis, the country ranks among the lowest performers, behind Finland, Belgium and Austria. France's RoE was 4.23%, three times the European average for the year. According to the ECB, France was able to hold its own thanks to its business model, with six major systemic or universal banks.
Less of an explosion in bad debts
These differences in results are also linked to the explosion in bad debts in several countries. French banks made fewer level 1 and 2 provisions than their neighbors. In all, nearly 22 billion euros in write-downs and provisions were recorded in France last year, compared with 37 billion euros in Spain and 18 billion euros in Italy.
Another possible explanation is the success of state-guaranteed loans (PGE), which have limited bad debts by preserving companies' cash flow.