New loan production at higher yields will strengthen the revenue base in retail and commercial banking, but the speed at which loan volumes will recover depends on the prospects for economic growth and sentiment, mostly for households and small and medium-sized enterprises (SMEs).

“Even though we expect French banks’ profits to grow, their return on risk-weighted assets lags that of EU peers, primarily due to limited balance-sheet repricing, driven by the peculiarities of the French lending and savings markets, and by the banks’ costly operational structures,” said Carola Saldias Castillo, lead analyst for French banks.

Annualised net profit to RWA remained in the range of 0.8%-1.5% in Q4 for our sample of banks (BNP Paribas, Crédit Agricole, BPCE, Société Générale), compared with more than 2.0% for Italian and Spanish banks.

“Stronger revenues have supported efficiency improvements,” Saldias said. “French banks’ cost-income ratios are below the 2022-2023 average but are still high compared with EU peers because of their comparably large branch networks and higher share of variable remuneration related to corporate and investment banking (CIB). We expect further improvements in efficiency as the revenue base continues to grow, but this will not be sufficient to close the gap with EU peers.”

Some normalisation of cost of risk and a moderate increase in NPLs are likely, but asset quality continues to be a strength for French banks. “We expect cost of risk (CoR) for all French banks to rise moderately in 2025 as asset quality normalises. In the context of growing revenues, we do not expect this increase to put pressure on profitability,” Saldias said.

Capital levels remain adequate and are still above targets. Organic capital generation remains below that of EU peers due to lagging profitability, which in turn keeps shareholder remuneration at more conservative levels, ranging from 50% to 60%, than the 80%-100% of peers.

The Stable outlooks assigned to the public ratings on BNP Paribas (AA-/Stable) and Crédit Agricole (AA-/Stable) indicate that risks to their credit profiles are broadly balanced in 2025.

Download the latest French banks quarterly here.

Scope has public ratings on BNP Paribas and Crédit Agricole:

Scope affirms and publishes BNP Paribas’ AA- issuer rating with Stable Outlook, December 2024
Scope affirms and publishes Crédit Agricole SA’s AA- issuer rating with Stable Outlook, December 2024

Scope also has subscription ratings on Banque Fédérative du Crédit Mutuel, BPCE, and Société Générale. To view the ratings and rating reports on ScopeOne, Scope’s digital marketplace, or to register, please click on the following links:

Banque Fédérative du Crédit Mutuel
BPCE S.A.
Société Générale S.A.