Banks facing a crisis are betting on the stability of enterprises

Posted January 10, 2023, 5:36 p.m

This can be one of the good resolutions of 2023: not to give in to the disasters around you. At the beginning of a year marked by continued deterioration in the economy, banks want to show optimism at this stage, reinforced by the stability of the economic structure.

“Business remains good. There is no real warning signal from our business customers,” says Pascal Pouye, director of development at Caisses d’Epargne. “They are not unaware of the challenges, but they remain calm despite everything,” adds Virginie Normand, deputy director of development for Banques Populaires.

Credit growth

This is evidenced by the good numbers of bank loans registered at the end of 2022. According to data from the Bank de France, the increase in outstanding amounts at the end of November was 7.7% (+5.8% for SMEs). has already increased significantly during the year.

“The challenges faced by French mid-sized companies in recent years have prepared them to face increased uncertainty in the coming year,” Olivier Simon, head of JP Morgan’s commercial banking in France and Benelux, said in a study. “Leaders continue to show evidence of optimism,” published this Wednesday.

Stability in PGEs

The resilience of companies and the satisfaction of their bankers can be read in the absence of warnings about the repayment of 143 billion euros of state-guaranteed loans massively granted during the Covid crisis. VSEs and SMEs, the main beneficiaries, started paying the first payments in most cases in the spring of 2022.

According to a semi-annual economic survey published by Bpifrance on Tuesday, 5% of companies fear default on their loans. This is slightly less than six months ago (6%). “In fact, the situation remains stable and that is quite reassuring. There is not too much concern on the part of VSEs and SMEs”, explains Philippe Mutricy, research director of Bpifrance.

This figure is more or less in line with estimates from the Banque de France, which is betting on a “total loss” rate of 4.6%, but also in line with feedback from the field at banks. Philippe Brassac, president of the French Banking Federation (FBF) and managing director of Crédit Agricole SA, said last week that 4% of PGEs were experiencing payment difficulties, mainly from small businesses.

Less investment

However, the economic horizon is full of heavy clouds for companies, especially VSEs and SMEs. And the economic situation is beginning to deteriorate. The European Central Bank (ECB) insists on caution. ECB Council member Kerstin af Jochnick also recalled on Tuesday “the need for banks to monitor risks affecting the economic outlook”.

The number of bankruptcies in France continues to rise and could return to pre-Covid levels this year. Faced with ongoing supply challenges and rising energy bills, SMEs have also seen their cash flow deteriorate, according to Bpifrance. And they expect their activity to slow down and their revenues to fall in 2023.

It is not out of the question for SMEs to cut all their investments at this stage, but the research of the People’s Bank reveals that this year, the amounts should really be resolved. The inflated cost of credit, cited by a third of the companies surveyed, is also becoming a major brake on investment, with rising interest rates. Baptiste Thornary, chief economist of the public bank, assures that “there is no crisis of confidence on the part of business leaders, even if the year is less good.”

Something that will reassure banks hoping for a continuation of the 2022 momentum at the start of the year. “Regardless of the market conditions, we will continue to finance the economy and business,” promises the big banker.

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