Rating agency Standard & Poor's has analyzed the financial situation of 13 institutions as part of a European review. Among them, the mutual group BPCE saw its credit rating downgraded from "A+" to "A".
BPCE sensitive to sustained low interest rates
Of the 13 institutions reviewed by S&P, only 2 had their credit ratings downgraded: Renault group subsidiary RCI Banque, and mutual group BPCE. Crédit Mutuel, Société Générale, BNP Paribas and Crédit Agricole, meanwhile, retained their ratings, namely "A" for Crédit Mutuel and Société Générale, and "A+" for BNP Paribas and Crédit Agricole.
After seeing its rating upgraded at the end of 2018, from "A" to "A+" on account of its financial strength, BPCE is downgraded this time to "A", with S&P rating agency deeming the group's business model to be more sensitive to the sustained low-rate environment than that of its French competitors. S&P calls BPCE's profitability "stable but weak, and less efficient".
A brighter outlook for the banking sector
While its profits were halved in 2020, the BPCE Group has bounced back in the 1st quarter of 2021. Its net banking income rose by more than 10% compared with Q1 2020, and its profits doubled to €624 million.
However, for S&P, these good results still lag behind those of BNP Paribas and Crédit Agricole in particular, justifying a downgrade of BPCE's credit rating.
Despite this, the rating agency has upgraded the outlook for the French banking sector from "negative" to "stable", and expects financial results to improve in 2021, thanks to support measures "from local and European authorities", as well as a rebound in activity.
However, S&P warns of risks that were already present before the health crisis began, mentioning low rates, competition between networks and the digitization of services, and stresses that they still threaten bank profitability.