France’s largest banks are missing out on the earnings bonanza at their European peers because of a quirk in the country’s rules that limits the benefit they get from higher interest rates.
(Bloomberg) — France’s largest banks are missing out on the earnings bonanza at their European peers because of a quirk in the country’s rules that limits the benefit they get from higher interest rates.
Credit Agricole SA saw revenue from retail banking in France fall 5% in the second quarter and Societe Generale SA even recorded a 14% slump, reports this week showed. At BNP Paribas SA, the country’s largest bank, the figure was little changed.
Compare that with double-digit gains at rivals such as Germany’s Commerzbank AG, which on Friday reported a 44% jump in net interest income, or Spain’s CaixaBank SA, where it surged more than half.
The difference stems in part from France’s regulated savings accounts, which are hugely popular with savers. The rate on those is set every six months by the French Finance ministry based on recommendations by the Bank of France, and it reflects in part the inflation rate. To make matters worse for lenders, rates on new mortgage loans are capped by what’s known as usury rate, leading lenders to decline some loan applications or provide them at a loss.
With inflation surging, banks in France have been paying a 3% interest on regulated savings accounts since February, up from 0.5% a year earlier. That’s attracted some €34.5 billion into those accounts in the first six months of the year, bringing the total to more than €544 billion.
Last month, Finance Minister Bruno Le Maire pledged to keep the rate on those accounts at 3% for the next 18 months, in a move that’s expected to give banks some breathing room.
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