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Société Générale crowned best-performing French lender

France’s largest banks are well positioned to absorb the blows from risks stemming from exposure to Russia, after rebounding from the Covid-19 pandemic in impressive fashion. Burhan Khadbai reports.
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After contracting by 8% in 2020, the French economy rebounded strongly with growth of 7% in 2021 — the country’s fastest expansion in 52 years. The French banking sector has emerged from the Covid-19 pandemic in similarly impressive fashion in terms of income and profitability, with France’s largest banks posting strong results in 2021, particularly in domestic retail and corporate and investment banking.

Société Générale is this year’s best-performing bank of France’s five largest lenders in The Banker’s Top 1000 World Banks 2022 ranking, with an overall score of 4.87. The bank has made a huge leap in the past 12 months, having been ranked at the bottom of the country’s best-performing table last year.

Société Générale’s surge to the top can be attributed to its excellence in growth, profitability and asset quality, where it is ranked first, while it is ranked second for liquidity and operational efficiency. In 2021, the French banking giant posted its best-ever financial results, with underlying revenues and group operating income up by 16.1% and 50% year-on-year, respectively.

Crédit Mutuel takes second spot in the best-performing table, with an overall score of 4.64, up from third place last year. The bank is ranked first for soundness and operational efficiency, with its cost-to-income ratio improving by 510 basis points, to 57.4%, in 2021. Among France’s five largest lenders, Crédit Mutuel is the only bank to have reported an increase to its Tier 1 capital position in 2021, up slightly from $69.38bn to $69.59bn, helping it move up one place to 29th in the Top 1000 World Banks ranking.

Crédit Agricole, France’s largest lender by Tier 1 capital, follows closely in third place with a score of 4.6. BNP Paribas, last year’s best-performing French bank, meanwhile takes fourth spot with a score of 4.44. While BNP Paribas is ranked first for liquidity, it is ranked bottom for most other metrics, including growth and asset quality, which explains its fall from the top spot. Group BPCE rounds off the top five ranking in fifth place, with a score of 4.38.

Conditions for French banks should remain strong in 2022 despite the economic slowdown in Europe, but one eye will be on the impact from French banks’ exposure to Russia.

Société Générale was the most exposed Western bank operating in Russia due to its Rosbank subsidiary, which accounted for €15.4bn of its €18.6bn exposure to Russia at the end of 2021. However, Société Générale has sold this subsidiary and ceased its activities in Russia, incurring a substantial hit in the process. For French banks with a large presence in Russia, cost of risk and loan provisions will rise, but overall impact should remain under control due to the diversified business of French lenders and the cushions provided by the unused provisions related to Covid-19.

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