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Shares in French banks fell sharply on Monday after President Emmanuel Macron called a snap election in the wake of his centrist alliance’s poor performance in Sunday’s European parliamentary elections.
Shares in Société Générale had fallen 8 per cent by late afternoon in Paris, while shares in BNP Paribas and Crédit Agricole were down 5.5 per cent and 4.4 per cent, respectively.
The banks led losses on France’s benchmark CAC 40 stock index, which dropped by up to 2.4 per cent, its steepest decline in over a year, as investors reacted to the possibility of a government led by Marine Le Pen’s far-right movement.
Preliminary results showed Le Pen’s National Rally party securing 31.5 per cent of the vote, significantly outperforming President Macron’s centrist alliance, which garnered 14.5 per cent.
In comments emailed to journalists, Johann Scholtz, an equity analyst at Morningstar, said investors were concerned about National Rally’s “interventionist economic policies”.
Scholtz noted that: “In many European jurisdictions, banks have become a soft target for populist measures such as windfall taxes and restrictions on dividends/share buybacks.”
France’s first round of parliamentary elections will be held on June 30 and July 7. In the latest 2022 parliamentary elections, Macron’s centrist alliance secured the highest number of seats but fell short of a majority in the National Assembly, leading to the formation of France’s first minority government since 1993.
The outcome of the elections won’t affect President Macron’s position, as his presidential term has three years remaining. Macron won the 2022 presidential election with 58.55 per cent of the vote, defeating Marine Le Pen, who received 41.45 per cent.
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The European Central Bank’s supervisory chair Claudia Buch warned on Tuesday that many eurozone banks are still not meeting accounting rules for the provisions needed to protect against loan losses, despite some progress in considering climate risks.
“While progress has been made, especially in the area of climate and environmental risks, many banks are still far from meeting the expectations of IFRS 9,” Buch told attendees of an ECB conference.
The International Financial Reporting Standard’s IFRS 9 rule requires banks to make upfront provisions when issuing loans and increase them if there are signs of potential default.
Although the proportion of unpaid loans has decreased to historic lows since the 2008 financial crisis, high interest rates and geopolitical risks, such as the war in Ukraine and trade disruptions with China and the US are causing renewed regulatory concerns.
Buch criticised banks for relying too much on broad “overlays” — general provisions for new risks that do not accurately reflect specific sectoral differences. She also noted that many banks failed to reclassify loans appropriately according to IFRS rules, which categorise loans into three stages: performing, underperforming and non-performing.
“Good risk management in banks requires improving the use of overlays to consider the impact of novel risks more precisely, to use simulations and scenarios, and to improve stage transfers,” Buch said.
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HSBC has expanded its workforce in China by over 300 employees, following the conclusion of its acquisition of Citigroup’s consumer wealth portfolio in mainland China.
The acquisition includes investment assets, deposits, and clients spanning 11 major cities in mainland China, which are all now integrated into HSBC’s operations.
Mainland China is becoming a major contributor to HSBC’s wealth management operations. According to a statement from the bank, during the initial quarter of 2024, the region experienced a 53 per cent increase in wealth invested assets and a more than 30 per cent increase in its wealth client base year on year.
The deal, initially announced in October, includes total deposits and investment assets under management, valued at around $3.6bn.
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Société Générale is struggling to agree a deal for its securities services unit, as potential bidders are reluctant to meet the price set by the French bank, as reported by Reuters citing unnamed sources familiar with the matter.
According to industry insiders, Société Générale has been actively pursuing the sale of Société Générale Securities Services since last year as part of CEO Slawomir Krupa‘s broader strategy to dispose of assets and streamline the bank’s operations.
Media reports suggest that Société Générale is seeking more than €1bn for the business unit.
