French banks, unlike their European rivals, are vowing to hang on to a broad array of businesses and even grow market share, a strategy backed by long-term investors but penalized by the market.
For while most European banks are battling sluggish economic growth and super low interest rates by cutting costs and retreating to their “core”, French lenders have decided the time is right to push the frontiers.
However, their pursuit of a so-called universal banking model has so far not won stock market approval, with shares in France’s three biggest banks, BNP Paribas (BNPP.PA), Societe Generale (SOGN.PA) and Credit Agricole (CAGR.PA), all trading at a discount to European peers.
Where they do have strong support is from the political establishment who believe France needs to punch above its weight in global financial services to support French companies’ overseas business in Francophone countries and beyond.
French Economy Minister Emmanuel Macron said in December “we have strong banks, based on a universal model, which is envied by many…and they (banks) were less affected by the crisis than others because they are more solid”.
This ability to pursue a variety of activities and geographies relies on a relative stability of revenues in the domestic retail network, which traditionally has been a cash cow for French banks, and their focus on large corporate clients.
And bonds formed at France’s prestigious universities means bank and company executives, central bankers and government officials often have a broadly shared viewpoint.
Another proponent of the need for French banking’s omnipresence is Societe Generale’s Chief Executive Frederic Oudea, who has argued that Europe needs “major banks” to finance the economy and to back consolidation of its large corporations.