French Banks' Results Solid in Q2 2023 Despite Pressure in Domestic Retail

DBRS Morningstar has released a commentary discussing large French banks’ Q2 2023 earnings, covering BNP Paribas SA, Société Générale S.A., Crédit Agricole Group and Groupe BPCE.

Key highlights include:

• French Banks’ revenues were affected by French Retail Banking and lower albeit resilient CIB. However, Specialised Financial Services, Private Banking and Insurance have remained key drivers of income generation in Q2 2023 and International Retail Banking performed well thanks to higher interest rates.

• Operating expenses remained under control despite inflationary pressures thanks to cost management. The cost-to-income ratio remained sound and much below than the levels reported in the past, although we expect inflation to continue pressuring French banks’ operating efficiency.

• Provisions were down at most banks and the cost of risk remained contained and below the French banks’ expectations for 2023.

“French banks continued to report overall solid results in Q2 2023 despite the downward trend in French retail banking resulting from specificities of the French market in a rising rates environment” said Arnaud Journois, Vice President, Global Financial Institutions at DBRS Morningstar. “The Q2 2023 results, although varied amongst banks have confirmed the trends observed in Q1 2023 and we expect French banks' credit metrics and performance to remain solid for the remainder of the year.”