Banking: France’s mere mortals are alive and well


Dominic O’Neill
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French bankers, like its politicians, do best when they promise less and achieve more – especially on the international stage.


Every French presidential election sees the search for a mythic providential man to lead the nation out of crisis. Emmanuel Macron has a better claim than his predecessor to succeed Louis XIV, Napoleon and Charles de Gaulle. Nicknamed Jupiter, after the Roman god, he has captured the political centre ground and wants to liberalize and relaunch the economy.

Finding a man to make France great again seems a little absurd in the 21st century. If French banks are to avoid looking equally ridiculous, they too must mostly accept second-tier status among the great powers of global finance. Their best chance of leadership is in Europe, where they have performed better than the big German and Italian banks of late.

The aftermath of the financial crisis has forced French banks to recognize their fragility, even within Europe. BNP Paribas has recently done well by setting realistic goals and thanks to small and considered acquisitions. All the big French banks have come to a similar realization. The difference is a matter of degree. The extreme is BPCE, the smallest of the big four. Its listed wholesale and asset-gathering division, Natixis, has proudly cut risk-weighted assets by 7% in the past four years. 

Falling out of the official roster of global systemically important banks in November will further burst any lingering dreams of empire; BPCE has the added benefit of a lower regulatory capital requirement. The occasional purchase to bolster its international asset management division is unlikely to damage the humble image Natixis presents to the public. 


The first watchword in its three year plan unveiled in November was ‘transformation’. By contrast, Société Générale gave the word ‘growth’ greater pride of place in its strategic plan, announced a few days later, although ‘transform’ featured prominently there too. There may be symbolic appeal in these banks’ international aspirations, or lack of them. 

Africa, for example, is now the first region to which SocGen points for international retail growth. This goes against the grain somewhat, especially after Barclays’ exit from the continent last year. The continent gets no mention in BPCE’s latest strategy announcement, although its previous three-year plan specifically pointed to retail growth in Africa. 

“We have a business model which can deliver better growth numbers than our peers,” SocGen’s chief exe cutive Frédéric Oudéa told Euromoney in December. Its Russian and African businesses are part of this high-growth, emerging market potential. Similarly, in investment banking, Oudéa thinks SocGen can take a bigger slice of the pie, as firms in Europe switch from bank to market financing, smaller players retreat, and because there are greater barriers to entry in wholesale than retail banking. 

At its investor day SocGen did not seize what Berenberg called an opportunity to rely less on revenue growth by cutting absolute costs. Rather than rewarding consistency – as perhaps they should and will – some investors seem to doubt SocGen’s determination to offset costs with higher revenues, especially on the markets side. News of more French branch closures and job cuts prevented a sell off at the end of the year, even if those cuts are rather modest compared with better-performing banks.

SocGen’s French retail network is today not the most efficient in France, although it is perhaps more advanced in digital banking than local rivals, thanks to Boursorama. “If we do not invest, there may be a short-term benefit to profits at the detriment of our longer-term capacity to compete,” argues Oudéa. Oudéa, like Macron and most French bank chiefs, is a graduate of the elite government school, ENA. Another énarque, Xavier Musca, is busy at Crédit Agricole – a less flashy group where provincial cooperative institutions still hold most power

Musca is deputy to chief executive Philipe Brassac, who rose through the regional ranks. Formerly a career civil servant, Musca was right-hand man to president Nicolas Sarkozy at the height of the eurozone crisis in the early 2010s. These days he is a Corsican leading a French expansion in Italy, but acquisitions such as those Crédit Agricole announced in September – €130 million for three small central Italian savings banks – are not very Napoleonic in ambition. Since joining Crédit Agricole in 2012, Musca has overseen an end to some of the bank’s more hubristic European forays by selling Greek bank Emporiki, for example. 


The group kept its more successful Italian operation, centred on Cariparma, and Italy has since been the sole focus for the group’s international retail growth. Even here it is aiming more for a strong regional, rather than national, market share. Like Natixis, Crédit Agricole has signalled big acquisitions would only fit its strategy in asset management. Amundi, of which Musca is chairman, bought UniCredit’s Pioneer for €3.5 billion in June, bolstering its asset management profile both in Italy and Germany, including via a distribution agreement with UniCredit. 

It seems premature to envisage complementing this in Germany with a retail franchise of its own, despite the group’s apparent excess capital and recent headlines about a potential Commerzbank merger. “We don’t need to expand our retail networks to support Amundi’s growth,” says Musca. “The fact that we have comfortable capital buffers doesn’t mean we are ready for external [inorganic] growth. What makes you competitive is the confidence of customers – the fact we are extremely solid is reassuring in a country like Italy – and a cost of liquidity that is lower than peers. 

“Maybe we miss opportunities, but it’s paramount to be credible vis-à-vis the market, and our medium-term plan.”