Lorre White reports, ‘French Banks Record Deposits …’

Will French Banks Record Deposits Grease The Wheels Of The Region’s Economic Recovery?

French banks’ corporate deposits hit a record at the end of 2012, helped by clients like Sebastien Mejean, the co-founder of online jeans retailer Sojeans.

The entrepreneur put most of the 2 million euros ($2.7 million) he raised from an Italian fund in deposits at Societe Generale SA and HSBC Holdings Plc’s French unit. Mejean, like BNP Paribas SA client LVMH Moet Hennessy Louis Vuitton, SA, the world’s largest luxury goods company, helped boost such holdings at French banks to 397.5 billion euros as of the end of December.

The offices of BNP Paribas SA, left, and Societe Generale SA, right, are seen in Geneva. SocGen said last month that complying with a 100 percent Basel III 30-day liquidity ratio this year is “within its reach.” BNP Paribas has said deposits from large companies are “at the heart” of its global corporate banking business. Photographer: Valentin Flauraud/Bloomberg

French lenders had the biggest jump in corporate deposits in the euro area, accounting for 44 percent of the region’s total increase, according to data from the European Central Bank. Burned by their blocked access to U.S. dollar funding and European debt markets at the height of the region’s more than three-year-old debt crisis, French banks went aggressively after such deposits, chalking up in December alone 21.2 billion euros – -almost as much as German banks got in all of 2012.

“This is a confidence indicator,” said Jean-Pierre Lambert, a London-based analyst at Keefe, Bruyette & Woods Ltd.“International companies with euro-periphery deposits probably had some preference to repatriate money with French banks.”

The deposits may provide French lenders — which report 2012 results starting tomorrow — with funds to grease the wheels of the region’s economic recovery when it materializes. The inflows also help to bolster their liquidity as new international rules come into play.

Alternative Funding

Before today, Societe Generale  has jumped 11 percent this year in Paris, while BNP Paribas has risen 5.1 percent, outperforming the benchmark CAC 40 Index, which was little changed. BNP Paribas rose as much as 1 percent today to 45.19 euros, while Societe Generale rose 1.1 percent to 31.89 euros.

“Our deposits have had a strong increase over the past months,” Pierre Palmieri, Societe Generale’s head of global corporate financing, said on Feb. 1. “Corporate clients don’t put deposits for seven years; it’s still a short-term source, but good alternative funding to money-market funds.”

Societe Generale, France’s second-largest bank, said last month that complying with a 100 percent Basel III 30-day liquidity ratio this year is “within its reach.” BNP Paribas, France’s largest bank, has said deposits from large companies are “at the heart” of its global corporate banking business.

Societe Generale may report a drop in fourth-quarter net income tomorrow to 80 million euros from 100 million euros a year earlier, according to the average estimate from nine analysts surveyed by Bloomberg. On Feb. 14, BNP Paribas will probably post an increase in profit for the period to 1.04 billion euros from 765 million euros, according to the average estimate of seven analysts in a separate poll.

Fastest Pace

French corporate deposits jumped 9.7 percent last year, more than 7.4 percent in Italy and 5.1 percent in Germany, data from the ECB show.

The surge in French corporate deposits, which have almost doubled in the past six years, helped the euro area hit a record 1.77 trillion euros in such amounts at the end of December, according to ECB data.

While French deposits grew at the fastest pace among major European nations, such collections also hit records in Germany, Italy, the Netherlands, Belgium, Austria and Finland. They slid in countries including Greece, Portugal, Ireland and Spain.

French lenders must “intensify” their adaptation to new liquidity rules, Bank of France Governor Christian Noyer told bank executives at a conference in January.

Liquidity Rules

Global central bank chiefs last month gave lenders four more years to comply fully with international liquidity rules. Banks in the European Union may need to comply with the rules before competitors in other parts of the world, according to a document obtained by Bloomberg.

The liquidity coverage ratio — which would force banks to hold enough easy-to-sell assets to survive a 30-day credit squeeze — is part of an overhaul of global financial rules, known as Basel III, intended to prevent a repeat of the financial crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc.

Societe Generale, BNP Paribas and Credit Agricole SA have since 2011 taken measures, including cutting short-term lending such as aircraft and shipping finance, to rely less on U.S. money-market funds, which dumped French paper in 2011 on debt- crisis contagion concern. Seeking deposits at home is part of that plan.

 

Thanks to LORRE WHITE, The Luxury Guru/WOMAN of ACTION™

CREDIT: Fabio Benedetti-Valentini, Bloomberg.com