France’s largest banks are facing added pressure on their income following a government decision to increase the rate on the popular Livret A regulated savings scheme by 100 basis points to 3%. This takes effect on February 1st, and means deposit costs on Livret A accounts have increased by 250 bps for French banks since February 2022.
The Livret A rate also provides a benchmark for rates on other popular regulated savings products in France, representing hundreds of billions of euros in additional deposits. The latest increase to the Livret A and other regulated savings accounts’ rates will cost French banks almost €2.4 billion in additional deposit costs, according to recent report. This represents around 1.4% of annual net banking income for the French banking sector and 4% of annual NBI for retail banking activities.
This increase in deposit costs for French banks comes as other revenue headwinds mount. The largely fixed-rate profile of their loan books means they are yet to see the same surge in lending income that many other European banks did in 2022.
French banks are also expected to reveal a slowdown in income from other streams such as investment banking, asset management and vehicle leasing, which helped produce bumper profits in 2021 when full-year 2022 results are announced in February.
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