France
The following data have been gathered by Capgemini and are part of the World Retail Banking Report published annually in March.
Macro economic indicators (2006)
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GDP at current prices and PPP
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€ 1,710 billion
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Inhabitants
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63,1 million
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GDP per head
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€ 27,059
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Financial services represent
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6.0%
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Economic growth rate
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2.3%
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Consumer confidence indicator
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-1.0
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Unemployment rate
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8.6%
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Banking staff
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548,019
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Number of branches
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27,328
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Number of ATMs
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47,816
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Households savings ratio
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15.5%
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Inflation rate
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1.5%
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Interest rate, consumer credit
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5.9%
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Interest rate, residential mortgage
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3.8%
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Interest rate on long term bonds
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4.2%
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Retail banking environment
• Prevalence of universal banking model (including brokerage)
• Under the 1984 law, only "Etablissements de crédit" are certified to do retail banking
• Those institutions have different ownerships (private, public or cooperative/mutual) but are under the same regulations and belong to FBF (Fédération des Banque de France)
Type and size of players
Cost/Income Ratio = operating expenses/operating income
• For 3 years, banks have regularly increased their NBI (average of 6% per year). In 2006, the average C/I ratio is 68%, that is also significant of an average decrease of 2% between 2005 and 2006
• The number of financial institutions has been constantly decreasing over the last 10 years (-44%) mainly to achieve economies of scale. The level of concentration has been constantly increasing
• 237 foreign financial institutions are competing into the French market, most of whom are European (161), but they are targeting the wealthy range of the retail banking market
• Direct banks and insurance companies (ING Direct, AXA Banque, Banque AGF, Groupama Banque) are keeping gaining market shares
• Few but growing number of independent financial advisers on the market
Products
• The 9 largest banks account for market shares of 73% on deposits and 86% on credit; slightly less than last years
• Deposits have shown a steady growth (7.3%) with interest rate increasing in 2006
• La Banque Postale and Caisse d'Epargne still profit by the monopoly to distribute the Livret A (Tax free saving account), although the EC has declared it outlaw
• Caisse d’Epargne, first mover, pays interests on accounts
• Direct and insurance banks are offering even more attractive rates on saving accounts ( ING Direct, Groupama Banque, AXA Banque, Banque AGF)
• Debit cards still represent the bulk of the French cards market; their number has increased by 7.4% to 55 millions in 2006. The utilization of cards through electronic commerce has increased by 5,9% (38% of all payment dealings
in 2006)
• Checks are still important (26% of all payment dealings in 2006) but decreasing (-4, 1%)
• Competition is high on mortgage, a typical offering used by French banks to attract new clients from their competitors; Banks are leader on the market of life insurance.
• Insurance companies are entering the retail banking market through the following products: MMA entered the market in the end of 2005 with a car/motor bike credit, Groupama Banque with a credit-saving product & consumer credits dedicated to youngsters, AXA Banque with consumer credits, car credits, real estate credits…
Trends
Consolidation of the market
• 01/01/2006 : Financial services of La Poste are certified as a common law bank under the name La Banque Postale
• 2006: Merger of banking financing activities, investment and financial services between the Caisses d’Epargne and Banques Populaires to form NATIXIS
• Banks mutualise their information system or back office activities to gain economies of scale
Regulatory changes
• Extension of the American Money Laundering Control Act to Europe, implemented to France in 2006
• Rules from European Union (90% implemented in France): MIF directive(2004/39/CE) applies to retail banking, Directive 2001/115/CE (since January 07 ) :banks must issue bills in order to recover V.A.T., CRD Capital Requirements Directive (2006/49/CE). Implementation of internal control procedures deriving from Basel II Act (>2008), and PSD - Payment Services Directive (approved April 2007), legal framework for SEPA
Business model
• Strong efforts are made to attract youngsters & to be closer to the client
• Credit specialists of larger groups continue to be very active on the marketplace
• Continued diversification of traditional retail banks to real estate (Caisses d’Epargne taken over 38, 2% of Nexity, French real estate leader) and home services markets. Move towards open architecture/asset management
Channel strategies
• Branch network optimization and modernization still going on in major French retail banks. 27,328 (+2%) branches in 2006
• Banks also invest on ATMs: 48 919 (+6%) ATMs in 2006
• Internet is seen as a key success factor in multi-channel strategies. 25% of bank clients are considered as “active website users”
