September promises to be a busy month for banks, with many uncertainties to contend with. The Russian and Italian subsidiaries of French banks are facing major political crises, while inflation continues to rise and interest rates continue to climb. Let's take a look at the main issues facing the banking sector in 2022.
Rising mortgage interest rates
Interest rates on mortgages have been rising steadily for several months now. From 1.12% in January, they stood at 1.32% in June, according to Banque de France figures.
While credit production has so far been unaffected by rising interest rates, things are likely to get more complicated this autumn. The banks are pointing the finger at the usury rate, which is rising too slowly in relation to interest rates and, in their view, risks blocking the market.
While the French Ministry of the Economy and Finance has not yet agreed to modify the method of calculating the usury rate, the main demand of the banking sector, it has nevertheless commissioned an expert report on the issue.
Bercy's demands on banks
To prevent the market from grinding to a halt, Bercy expects the banks to put the brakes on rate rises, believing that their margins are comfortable enough to do so.
A meeting is scheduled for September with representatives of the banking and insurance industries, whom Bercy hopes to convince to lower bank charges and insurance premiums. The aim is to preserve the purchasing power of the French, which has been undermined by inflation.
For their part, the banks fear that the government may decide to imitate Hungary or Spain, where exceptional taxes are now being applied to several business sectors, including banking, in order to finance household assistance plans.
The future of French banks in Russia
If European banks, including French banks, continue to leave Russia, the amount of their exposure will impact their share buyback and dividend policies.
This is particularly true of the Italian banking group Unicredit, which is gradually reducing its exposure with the aim of selling at a good price, which is currently out of the question with 18 billion euros of exposure at the end of the second quarter of 2022. After selling Rosbank, Societe Generale' s exposure has been reduced to 3.1 billion euros.
According to DBRS, the most feared scenario is that of a new energy shock: European banks would then have to face negative capital generation.
Crédit Agricole and the Italian political crisis
Crédit Agricole, which has held a 9.18% stake in the Peninsula's 3rd largest bank, Banco BPM, since April, risks seeing its plans thwarted by the Italian political crisis.
In 2021, Crédit Agricole acquired the Lombard bank Credito Valtellinese (Creval), and plans to establish a partnership with Banco BPM in the insurance business.
But Italy, now Crédit Agricole 's 2nd largest market , is shaken by a political crisis that could disrupt the French group's plans. The resignation of Prime Minister Mario Draghi and early parliamentary elections scheduled in a few weeks' time are holding back foreign investors, who fear that the ultraconservative Fratelli d'Italia party will come to power.
An uncertain economic climate
The risk of recession in 2023 looms over the banking sector, faced with a highly uncertain economic climate marked by the Russian-Ukrainian conflict, the Italian political crisis, supply difficulties and inflation.
The European Central Bank's rate hike will enable banks to increase their margins, but they are also likely to face an upsurge in bad debts.
In anticipation of these difficulties, it is likely that the High Council for Financial Stability, due to meet at the end of September, will require banks to increase their capital.
Pooling distributor fleets
Last year, Société Générale, BNP Paribas and Crédit Mutuel announced their intention to pool their ATM fleets.
Faced with a decline in cash withdrawals, the pooling of ATM fleets appears to be a way of containing the rise in operating costs while maintaining an extensive network. The scoping phase of this mutualization project is due to be completed by the end of the year, for implementation by the end of next year.
Only a few months after the 2022 salary negotiations, new discussions were opened in certain establishments at the request of the unions, who are determined to convince the management of the major banks to broach the subject again in September.
The collective wage increases achieved at the beginning of the year are considered by the unions to be highly inadequate in the face of rising inflation. Increases averaged between 0.5% and 1%, while prices rose by 6.1% year-on-year in July.