French banks going on charm offensive and competition returning as rates fall

Bank Societe Generale

This month saw many of the major French banks taking out adverts in the French press to try to get across the message that they exist “at the service of the French economy”. The reason for this move is to combat some of the aggressive rhetoric from French politicians such as Francois Hollande, who is running for President against Sarkozy in the forthcoming elections in May. Both Hollande and Sarko are keen to be seen as taking a tough stance on the banks and to use a”divide and ” strategy. In defensive moves, many French banks have been disposing of Foreign held assets and jobs to focus on their home markets in an effort to control the trend towards increased regulation and the division of “casino” speculation and retail banking activities.We have certainly seen this evidence of these measures to reduce risk as the policy of many banks underwriting criteria have become more restrictive towards non-French resident borrowers.

In spite of the trend for deleveraging and risk reduction by the French banks which has reduced the available loan to value, the French market remains comparatively buoyant with 70%-85% still achievable at average rates from 3%-4%.

On an even brighter note, we actually saw some of the decreases in the Euribor rates being passed on to borrowers this month with rate falls of up to 0.50%. We are also starting to see the return of competition to the market with banks carefully positioning their rates versus their competitors to attract the best clients. In addition, the ECB just announced that 800 banks accross the EU have taken up loans worth 530bn euros, which will no doubt put any fears of a credit crunch to rest- all positive news for those looking to buy this year.

 

Happy Leap day.