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EQUITY RESEARCH                                                                                                           ...
Barclays Capital | French BanksSummary of our Ratings, Price Targets and Earnings Changes in this Report (all changes are ...
Barclays Capital | French BanksFUNDING                                                           In this section we explor...
Barclays Capital | French BanksFigure 4: European bank bond issuance (€bn)                                                ...
Barclays Capital | French Banks                                                                 Figure 8: Foreign bank dep...
Barclays Capital | French BanksFigure 9: Société Générale – funding chart (1)Source: Company presentation to debt investor...
Barclays Capital | French Banks                                                                               Our own atte...
Barclays Capital | French BanksFigure 13: Debt & interbank funding mix                                                    ...
Barclays Capital | French BanksSOVEREIGN EXPOSURES AND MARK-TO-MARKETS                                             The fun...
Barclays Capital | French BanksFigure 17: Indicative sovereign markdowns, based on current bond prices (Euro m)           ...
Barclays Capital | French Banks                                   Figure 21: Market implied write-down to tangible book, r...
Barclays Capital | French BanksLATEST OPERATIONAL TRENDS                                                         Net inter...
Barclays Capital | French BanksFigure 25: French retail fees & commissions                                                ...
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
Financial Pacific - French banks, Funding - Fundamentals (third party)
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Financial Pacific - French banks, Funding - Fundamentals (third party)

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Transcript of "Financial Pacific - French banks, Funding - Fundamentals (third party)"

  1. 1. EQUITY RESEARCH 7 September 2011FRENCH BANKS SECTOR UPDATE European BanksFunding & fundamentals 2-NEUTRAL UnchangedTrading at distressed levels: Share prices back near 2008/09 lows, and valuations For a full list of our ratings, price target and earnings changes in this report, please seeeither side of half tangible book, reflect a range of fears. Observers refer to funding table on page 2.tensions, sovereign marks and possible recapitalizations. Perhaps more likely, marketsmay be trading probabilities around more binary eurozone scenarios, in which bank European Banksshares might be worth 0x or 1x book. In this note we update forecasts after 2Q results, Jeremy Sigeeand reduce price targets on BNP Paribas from €66 to €45; on SocGen from €51 to €22; +44 (0)20 3134 3363 jeremy.sigee@barcap.comon Credit Agricole from €11 to €5 and KBC from €41 to €24. Barclays Capital, LondonFunding market tensions: Various pressures are visible (wider spreads, low issuance, Kiri VijayarajahLibor/OIS, $ money markets). Some credit investors seem to have been spooked by +44 (0)20 3134 5745recent SocGen disclosures. French bank funding structures appear skewed to short kiri.vijayarajah@barcap.comterm wholesale, light on longer-term debt, although not off the scale. Barclays Capital, LondonSovereign exposures pricing in worse than bond markets: Marking sovereign European Banksexposures to market (GR -50%, PT -40%, IR -25%, IT -6%, SP-5%) would cause Simon Samuelsrelatively limited damage to tangible book values (BNP -7%, CASA -4%, SG -3%). Wewould need to mark SP & IT by 28-100% and FR & BE by 6-12% to explain share prices. Jeremy SigeeOperating trends mixed but harmless: Back in the day-to-day businesses, the Rohith Chandra-Rajannumbers are pretty well behaved: asset quality is generally improving, margins are a Kiri Vijayarajahlittle soft, and costs performances mixed. Mike HarrisonFigure 1: Debt & interbank funding mix Antonio Rizzo 100% Carlos Cobo Catena 90% Yulia di Mambro 80% 70% Christoffer Rosquist 60% >5yrs Nimish Rajkotia 50% 1-5yrs 40% 3m - 1yr 30% 20% <3m 10% All analysts above are employed by Barclays 0% Capital, London Agricole Deutsche JPMorgan SocGen Sanpaolo BNP Paribas UniCredit Barclays UBS RBS HSBC Credit Intesa BankSource: Company reports and Barclays Capital analysis.Barclays Capital does and seeks to do business with companies covered in its research reports. As aresult, investors should be aware that the firm may have a conflict of interest that could affect theobjectivity of this report.Investors should consider this report as only a single factor in making their investment decision.This research report has been prepared in whole or in part by research analysts based outside the USwho are not registered/qualified as research analysts with FINRA.PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 21.
  2. 2. Barclays Capital | French BanksSummary of our Ratings, Price Targets and Earnings Changes in this Report (all changes are shown in bold)Company Rating Price Price Target EPS FY1 (E) EPS FY2 (E) Old New 05-Sep-11 Old New %Chg Old New %Chg Old New %ChgEuropean Banks 2-Neu 2-NeuBNP Paribas (BNP FP / BNPP.PA) 1-OW 1-OW 31.30 66.00 45.00 -32 7.21 7.12 -1 7.99 7.79 -3Credit Agricole SA (ACA FP / CAGR.PA) 3-UW 3-UW 5.85 11.00 5.00 -55 1.70 1.25 -26 2.15 1.91 -11KBC (KBC BB / KBC.BR) 1-OW 1-OW 16.65 41.00 24.00 -41 4.29 3.41 -21 4.67 4.36 -7Société Générale (GLE FP / SOGN.PA) 2-EW 2-EW 20.25 51.00 22.00 -57 5.16 3.85 -25 6.17 5.23 -15Source: Barclays Capital Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency.FY1(E): Current fiscal year estimates by Barclays Capital. FY2(E): Next fiscal year estimates by Barclays Capital.Stock Rating: 1-OW: 1-Overweight 2-EW: 2-Equal Weight 3-UW: 3-Underweight RS: RS-Rating SuspendedSector View: 1-Pos: 1-Positive 2-Neu: 2-Neutral 3-Neg: 3-Negative7 September 2011 2
  3. 3. Barclays Capital | French BanksFUNDING In this section we explore some of the pressures in bank funding markets, and try to link them to company disclosures and balance sheet fundamentals. Our particular focus in this note is on the French banks, but in some instances we make comparisons with other European and US banks to see the relative position. Equity & credit market context Readers will be well aware that the equity share price of SocGen, for example, is back around its 2008/09 lows, as is its price/book multiple (0.3x reported book according to the DataStream series shown in Figure 2, or 0.4x tangible 2011E book on our own numbers). Similarly SocGen’s CDS spreads are as wide as KBC traded in the crisis, and other French and Belgian banks are not far behind either (Figure 3). In this report we will explore how these stressed equity and credit prices relate to funding market conditions, sovereign exposures and operating trends. But it is worth emphasising up-front that other bigger factors are at play. With many European banks trading around 0.5x tangible book value, we think it less likely that this is a true fair value based on specific adjustments or calculations, and more likely that the shares are being traded on a probability basis between macro scenarios in which banks are worth either 0x or 1x tangible book value. Values are affected by some investors stepping back from single-stock equity or credit investing until greater macro clarity returns, and other investors using bank shares and CDSs to invest/hedge/short as proxies for the macro issues themselves.Figure 2: Société Générale – share price and price/book Figure 3: French/Belgian banks – CDS spreads 100 1.8x 400 SocGen share price (left scale) SG KBC 90 1.6x 350 CASA BNP SocGen price/book multiple (right scale) 80 1.4x 300 70 1.2x 60 250 1.0x 50 200 0.8x 40 150 0.6x 30 0.4x 100 20 10 0.2x 50 0 0.0x 0 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11Source: DataStream. Source: DataStream. Funding market observations Senior bond issuance by European banks has in recent weeks dried up almost entirely (Figure 4). There has been some recent activity in covered bond markets, but at wider spreads (Figure 5).7 September 2011 3
  4. 4. Barclays Capital | French BanksFigure 4: European bank bond issuance (€bn) Figure 5: French bank covered bond spreads 90 140 Snr Unsecured Covered Bonds Credit Mutuel 80 120 Banque Populaire 70 SocGen 100 Dexia 60 Credit Agricole 80 BNP Paribas 50 60 40 40 30 20 20 10 0 0 -20 20-Dec 24-May 9-May 15-Nov 15-Mar 4-Apr 19-Apr 4-Jan 28-Jun 24-Jan 13-Jun 6-Sep 8-Feb 2-Aug 18-Jul 11-Oct 28-Feb 22-Aug Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11Source: Dealogic. Source: Bloomberg. USD funding for international (predominantly European) borrowers has fallen back since the spring, and is now at the low end of the range, although no worse than that, and indeed their share of the funding pool remains higher than pre-2009 (Figure 6). There was a flurry of excitement when a single player accessed the ECB dollar swap facility a couple of weeks back, but that appears to have been an isolated incident, and we’re not even beginning to return to what we saw in 2008/09 (Figure 7). Indeed it is interesting to note – as a number of European banks have emphasised – that they have become even bigger depositors of dollars at the Federal Reserve (Figure 8), and in a number of cases are net suppliers of dollar liquidity not net takers.Figure 6: Foreign banks in US$ funding market Figure 7: Usage of the ECB dollar swap facility 100 Non-US financial issuers CP outstanding in the US CP market (US$ bn) 600 45% allotted amount ($bn) Non-US financial issuers CP as pct of total US CP market, right scale 90 40% # bidders 500 80 35% 70 400 30% 60 25% 300 50 20% 40 200 15% $0.5bn, 1 bank 10% 30 100 5% 20 0 0% 10 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 0 Oct-08 Jul-09 Apr-10 Dec-10 Sep-11Source: Bloomberg Source: ECB, Barclays Capital7 September 2011 4
  5. 5. Barclays Capital | French Banks Figure 8: Foreign bank deposits at Federal Reserve US$bn 1200 Foreign banks 1000 800 600 400 Large domestic banks 200 0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Source: Federal Reserve SocGen disclosures picked on by credit investors Against the backdrop of many other things going on, and concerns on many fronts, it appears that some investors in the credit markets picked up on some disclosures from SocGen that they found alarming. These were in a presentation to debt investors posted 30th August and dated September 2011. The first (Figure 9) sought to illustrate “consistency between the Group’s short term liquidity needs and its liquid assets” (in the words of the bullet points that accompanied the chart), ie, “net short-term funding outstanding of €148bn <1year, of which €11bn <3months” compared to “liquid assets of €105bn, of which €60bn are repo-able to central banks, net of haircuts”. The second (Figure 10) sought to emphasise “well diversified short term funding sources” and to illustrate the group’s ability to adapt to reduced availability of US$ money market funding. “Proactive management of the August pullback of US money market funds: decrease of long position with the Fed; use of €/$ swaps in interbank market; reduction of market activities needs. € funding remained abundant at all times and was increased in August. More structural actions can be implemented if $ funding durably lower, with manageable P&L impact.” But it seems that the charts were interpreted negatively by some in the jittery credit markets. From the first chart, the short-term funding (€183bn/€148bn/€112bn) is bigger than the liquid assets buffer available to replace it (€105bn). From the second chart, $ money market funding still outstanding is a big number, and if all of it ran off (as the company implies is conceivable) then it would use up pretty much all of the central bank eligible liquid assets identified in the first chart, and then the safety buffer has gone, and any pressure beyond that would need asset sales or other less desirable measures. This is not necessarily our interpretation, indeed we find the assets and liabilities being compared in the first chart a slightly odd match, but these views and fears seem to have circulated in the credit and funding markets.7 September 2011 5
  6. 6. Barclays Capital | French BanksFigure 9: Société Générale – funding chart (1)Source: Company presentation to debt investors, September 2011Figure 10: Société Générale – funding chart (2)Source: Company presentation to debt investors, September 20117 September 2011 6
  7. 7. Barclays Capital | French Banks Our own attempt to compare wholesale funding structures This begs the question what should investors think about the funding structure and resilience/vulnerability of SocGen or other banks in the spotlight, so we’ve gone through the maturity disclosures of several relevant European banks (plus JPMorgan) for comparison. We should post a big warning up front, that there are many other factors at play here, big differences in the asset and liability mixes of the different banks, differences in the depth of their local funding markets, track records, perceived sovereign support, and more besides. Also the data we analyse here is from end-2010 annual reports, and may have changed materially already since then. So this is only one perspective, and we need to interpret with care. There are a number of relevant observations that offer themselves from the numbers. The French banks in absolute terms have some of the biggest amounts of short-term debt outstanding (Figure 11). Among this peer group they have relatively smaller absolute amounts of long-term debt in place (Figure 12). As a result their wholesale funding mix is more skewed to the short term (Figure 13). The picture remains the same if we compare funding to total assets (adjusted ex derivatives), the French banks look overweight short- term funding sources and underweight long-term funding (Figure 14). Taking this a stage further, and comparing the short-term funding stock to tangible common equity, we see the French banks at the most geared end of the spectrum (Figure 15). Just to balance these observations, while the French banks are in all of these charts at the more vulnerable end of the spectrum, they are not on a dimensionally different scale, and indeed there are one or two other banks in similar situations on some metrics. And as we said up front this is only one perspective on a complex topic.Figure 11: Short term debt & interbank funding (Em) Figure 12: Long-term debt (Em) 300,000 160,000 <3m 3m - 1yr 1-5yrs >5yrs 140,000 250,000 120,000 200,000 100,000 150,000 80,000 60,000 100,000 40,000 50,000 20,000 0 0 Credit Agricole Credit Agricole JPMorgan SocGen JPMorgan SocGen Intesa Sanpaolo Intesa Sanpaolo UniCredit UniCredit BNP Paribas BNP Paribas Barclays Barclays RBS UBS RBS UBS HSBC Deutsche Bank Deutsche Bank HSBCSource: Company reports and Barclays Capital. Source: Company reports and Barclays Capital.7 September 2011 7
  8. 8. Barclays Capital | French BanksFigure 13: Debt & interbank funding mix Figure 14: Debt & interbank funding as % of assets 100% 35% 90% <3m 3m - 1yr 30% 1-5yrs >5yrs 80% 70% >5yrs 25% 60% 1-5yrs 20% 50% 3m - 1yr 40% 15% 30% <3m 10% 20% 10% 5% 0% 0% Credit Agricole JPMorgan SocGen Intesa Sanpaolo UniCredit BNP Paribas Barclays UBS RBS HSBC Deutsche Bank Credit Agricole JPMorgan SocGen Intesa Sanpaolo UniCredit BNP Paribas Barclays RBS UBS Deutsche Bank HSBCSource: Company reports and Barclays Capital. Source: Company reports and Barclays Capital. Assets here are adjusted ex derivatives PRVs. Figure 15: Debt & interbank funding as % of tangible common equity 16.0x <3m 3m - 1yr 14.0x 1-5yrs >5yrs 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x Credit Agricole SocGen JPMorgan Intesa Sanpaolo UniCredit BNP Paribas Barclays RBS UBS Deutsche Bank HSBC Source: Company reports and Barclays Capital.7 September 2011 8
  9. 9. Barclays Capital | French BanksSOVEREIGN EXPOSURES AND MARK-TO-MARKETS The funding concerns on the French banks originated from their apparent large exposures to troubled sovereigns. In this section, we revisit these exposures (see Figure 16) and reconfirm our view that overall, these sovereign exposures remain manageable. In addition to Greece, Ireland, Portugal, Spain and Italy, we also show France and Belgium. In Figure 17 we show the likely write-down implied by current trading prices of these government bonds. In the case of Greece is after the write-downs already taken in 2Q. Pricing on French and Belgian government bonds shows they remain close to par (for now) and so we ascribe no additional write-down. So in aggregate we project the largest incremental write-downs at BNP of €3.8bn, with the other 3 banks all requiring €0.8-0.9bn. In Figure 18 we show the current discounts to tangible book value in relation to the sovereign exposures. The P/TBV discount at SocGen is widest, and now represents 144% of all the peripheral countries plus French plus Belgian banking book sovereign exposures. The current discounts to book are driven by much broader macro concerns, and attributing all of the discount to a single risk factor (i.e. sovereign) is too simplistic. However, it does give a sense of how severely sovereign risks have been priced into equity valuations. In Figure 19 and Figure 20, we attempt to link bank equity valuations to sovereign bond valuations. We start with the current discount to tangible book. Then assume some portion of that is driven by a Basel-3 related capital shortfall, leaving a residual equity discount. We then back out the required level of haircuts on the peripheral countries / French/ Belgian sovereign bonds that would explain that residual equity discount. Overall, we find that the implied haircuts go well beyond what the bond market has currently priced in. So in the case of SocGen, we find the implied write down on Italian and Spanish government bonds is at 100% and on French and Belgian government bonds is 23%. At BNP the respective haircuts are 28% and 6% and at Credit Agricole are 63% and 13%. In Figure 21 and Figure 22, we add an extra degree of sophistication by applying a “warranted” price-to-book multiple to each of the 4 banks. This is to capture the fact that prior to the sovereign crisis, Credit Agricole was at a perennial discount to TBV, whereas KBC and BNP typically traded at small premiums to trailing TBV. This results in the equity market implied bonds write-downs at BNP to be larger (i.e. and closer to SocGen). For Credit Agricole the equity price implied write-downs are now the least severe of the 3 French banks.Figure 16: Sovereign banking book exposures (Euro m) Spain Greece Ireland Italy Portugal France Belgium Other TOTALBNP Paribas 3,156 3,552 433 21,835 1,785 16,287 23,723 20,545 91,316Credit Agricole 1,765 278 144 7,843 658 17,567 2,189 6,071 36,515SocGen 1,300 1,600 300 2,200 200 5,166 158 22,881 33,805KBC 2,200 500 400 6,100 300 1,539 15,819 18,879 45,737Source: Company reports and presentations7 September 2011 9
  10. 10. Barclays Capital | French BanksFigure 17: Indicative sovereign markdowns, based on current bond prices (Euro m) Spain Greece Ireland Italy Portugal France Belgium Other TOTAL As % of TBVBNP Paribas 158 1,544 108 1,310 714 0 0 0 3,834 7%Credit Agricole 88 81 36 471 263 0 0 0 939 4%SocGen 65 464 75 132 80 0 0 0 816 3%KBC 110 145 100 366 120 0 0 0 841 9%Source: Bloomberg, company presentations and Barclays CapitalFigure 18: Current discounts to tangible book relative to sovereign exposures (Euro m) Market implied ..as % of Trailing write-down ..as % of peripherals* ..as % of all Mkt Cap 2Q11 TBV P/TBV to book ..as % of GIP peripherals* +Be+Fr sovereignBNP Paribas 37,802 54,566 0.7x -16,764 291% 54% 24% 18%Credit Agricole 14,601 26,407 0.6x -11,806 1093% 110% 39% 32%SocGen 15,716 31,494 0.5x -15,778 751% 282% 144% 47%KBC 5,958 9,249 0.6x -3,291 274% 35% 12% 7%* Greece, Italy, Ireland, Portugal, Spain.GIP refers to Greece Ireland & PortugalSource: Company reports, datastream and Barclays Capital Figure 19: Market implied write-down to tangible book, relative to 1.0x P/TBV Warranted Discount to Less: Mkt implied write price to "Fair current mkt B3 Capital down, ex B3 Euro m book value" cap "gap" capital gap BNP Paribas 1.0 54,566 16,764 575 16,188 Credit Agricole 1.0 26,407 11,806 1,442 10,364 SocGen 1.0 31,494 15,778 3,828 11,951 KBC 1.0 9,249 3,291 530 2,761 Source: Barclays CapitalFigure 20: Share price implied write-downs to sovereign exposures, relative to 1.0x P/TBV Spain Greece Ireland Italy Portugal France Belgium Other TOTALBNP ParibasExposure 3,156 3,552 433 21,835 1,785 16,287 23,723 20,545 91,316Implied remaining write-down % 28% 100% 100% 28% 100% 6% 6% 6%Implied remaining write-down 886 3,552 433 6,131 1,785 915 1,332 1,154 16,188Credit AgricoleExposure 1,765 278 144 7,843 658 17,567 2,189 6,071 36,515Implied remaining write-down % 63% 100% 100% 63% 100% 13% 13% 13%Implied remaining write-down 1,109 278 144 4,929 658 2,208 275 763 10,364SocGenExposure 1,300 1,600 300 2,200 200 5,166 158 22,881 33,805Implied remaining write-down % 100% 100% 100% 100% 100% 23% 23% 23%Implied remaining write-down 1,300 1,600 300 2,200 200 1,163 36 5,152 11,951KBCExposure 2,200 500 400 6,100 300 1,539 15,819 18,879 45,737Implied remaining write-down % 10% 100% 100% 10% 100% 2% 2% 2%Implied remaining write-down 221 500 400 612 300 31 318 379 2,761Source: Barclays Capital7 September 2011 10
  11. 11. Barclays Capital | French Banks Figure 21: Market implied write-down to tangible book, relative to warranted P/TBV Warranted Discount to Less: Mkt implied write price to "Fair current mkt B3 Capital down, ex B3 Euro m book value" cap "gap" capital gap BNP Paribas 1.3 70,936 33,134 575 32,558 Credit Agricole 0.9 23,766 9,166 1,442 7,723 SocGen 1.0 31,494 15,778 3,828 11,951 KBC 1.3 12,024 6,066 530 5,536 Source: Barclays CapitalFigure 22: Share price implied write-downs to sovereign exposures, relative to warranted P/TBV (Euro m) Spain Greece Ireland Italy Portugal France Belgium Other TOTALBNP ParibasExposure 3,156 3,552 433 21,835 1,785 16,287 23,723 20,545 91,316Implied remaining write-down % 72% 100% 100% 72% 100% 14% 14% 14%Implied remaining write-down 2,279 3,552 433 15,765 1,785 2,352 3,426 2,967 32,558Credit AgricoleExposure 1,765 278 144 7,843 658 17,567 2,189 6,071 36,515Implied remaining write-down % 45% 100% 100% 45% 100% 9% 9% 9%Implied remaining write-down 794 278 144 3,527 658 1,580 197 546 7,723SocGenExposure 1,300 1,600 300 2,200 200 5,166 158 22,881 33,805Implied remaining write-down % 100% 100% 100% 100% 100% 23% 23% 23%Implied remaining write-down 1,300 1,600 300 2,200 200 1,163 36 5,152 11,951KBCExposure 2,200 500 400 6,100 300 1,539 15,819 18,879 45,737Implied remaining write-down % 28% 100% 100% 28% 100% 6% 6% 6%Implied remaining write-down 614 500 400 1,701 300 86 882 1,053 5,536Source: Barclays Capital7 September 2011 11
  12. 12. Barclays Capital | French BanksLATEST OPERATIONAL TRENDS Net interest margins sag Net interest margins in domestic retail banking seem to be weakening. In the case of BNP and SocGen, margins remain above the recent trough of late 2008 – early 2009. However, at Credit Agricole, the net interest margin is more volatile and has most recently dipped below previous lows (see Figure 24). Interestingly, this may be linked to Credit Agricole outpacing peers in domestic retail loan growth (see Figure 26), perhaps suggesting some margin sacrifice to gain market share. By contrast, Credit Agricole has lagged peers’ deposit growth, although gap started opening before the financial crisis (see Figure 27). The slight advantage that SocGen was building on retail deposit volumes compared to BNP has now closed. Similarly, life insurance volume trends are remarkably homogenous among the 3 banks (see Figure 29). Retail fees & commission have weakened for all 3 players, but post post-crisis Credit Agricole has visibly lagged peers, while this metric is the main success story for SocGen. Falling mutual fund balances (see Figure 28) have contributed to the weaker fees & commissions, and have now dipped below crisis period lows at SocGen and Credit Agricole. In international retail, BNP remains the clear winner, and Credit Agricole the visible loser (heavily influenced by Emporiki). KBC’s international retail revenues show the strongest bounce from the trough.Figure 23: Domestic retail revenues rebased, 2002=100 Figure 24: French retail net interest margins 170 2.0% Soc Gen BNP outperforms BNP Paribas 160 BNP Paribas through the crisis 1.9% Credit Agricole S.A. SocGen 150 SocGen begins to 1.8% pull away in 2005-07 Credit Agricole 140 Credit Agricole outperforms after 1.7% 130 Credit Lyonnais 1.6% 120 1.5% 110 1.4% 100 90 1.3% 80 1.2% 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Source: Company reports and Barclays Capital Source: Company reports7 September 2011 12
  13. 13. Barclays Capital | French BanksFigure 25: French retail fees & commissions Figure 26: French retail loans 150 180 BNP Paribas SocGen Credit Agricole BNP Paribas 170 140 SocGen 160 130 Credit Agricole 150 120 140 130 110 120 100 110 90 100 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11Source: Company reports and Barclays Capital Source: Company reports and Barclays CapitalFigure 27: French retail deposits Figure 28: French mutual funds 160 150 BNP Paribas 140 150 SocGen Credit Agricole 130 140 120 130 110 100 120 BNP Paribas 90 SocGen 110 80 Credit Agricole 100 70 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11Source: Company reports and Barclays Capital Source: Company reports and Barclays CapitalFigure 29: French life insurance Figure 30: International retail revenues 180 130 BNP Paribas SocGen BNP Paribas 125 170 Credit Agricole KBC SocGen 120 160 Credit Agricole 115 150 110 140 105 100 130 95 120 90 110 85 80 100 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11E 4Q11E 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11Source: Company reports and Barclays Capital Source: Company reports and Barclays Capital7 September 2011 13

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