(News Bulletin 247) – At the forefront of political uncertainties, listed French banks have had a difficult journey following the results of the second round of legislative elections.

The three listed French banks, BNP Paribas, Société Générale and, to a lesser extent, Crédit Agricole SA, were once again subject to investor distrust at the start of the week, frightened by political uncertainty and the breakthrough of the New Popular Front in the legislative elections.

On Monday and Tuesday, BNP Paribas shares lost 4.07%, Société Générale 3.46% and Crédit Agricole SA 1.76%.

“The operating environment of French banks could come under pressure if political uncertainty persists beyond the legislative elections,” Fitch predicted in a note last week.

This is indeed the case this week, with the second round of legislative elections called after the dissolution of the National Assembly not resulting in any absolute majority.

Another thorn in the bankers’ side, likely to cool investors: the turnaround in the results between the first and second rounds, to the advantage of the New Popular Front (NFP), ahead of the presidential camp and the National Rally (RN).

For example, in June, a director of a large French bank told AFP that the NFP’s programme was “more serious” economically than that of the RN, while the boss of a large asset manager described it as “irresponsible”.

Listed banks have already had a bad month of June: Société Générale lost nearly 20% of its stock market value, BNP Paribas, 12% and Crédit Agricole SA, nearly 15%. It is the worst month since March 2023 for the first two and since June 2022 for the third.

A wait-and-see attitude with the political climate

In their activity, banks have also been subjected to the wait-and-see attitude of economic agents for several weeks. The online bank N26 thus reported a “flat EEG” on the weekends following the dissolution, with significantly fewer transactions among its French customers.

The prevailing uncertainty is not likely to revive the mortgage market, which has been at a standstill for several months, and is weighing on the morale of business leaders. On Monday, the Medef brandished the threat of a “deep and lasting economic crisis” in the event of the application of several measures of the New Popular Front, which could affect the economic health of companies and their creditors.

Banks also have something to lose in terms of their clients’ savings allocations. A new tax situation, particularly for the richest, is likely to disrupt their investment choices, more to the advantage of foreign players than domestic ones.

For the rest of the clientele, the Green MP Sandrine Rousseau estimated for example on Friday July 5 on the set of RMC that it was necessary to “increase the remuneration of the Livret A”, an additional cost for banking players.

A program that is not very favorable to banks

In its programme, the NFP, an alliance of the PS, LFI and the Ecologists, which came out on top on Sunday evening but did not have a majority, is directly targeting the banks.

He announced that he wanted to “regulate banking and finance” at several levels: increasing reserves, banning the financing of fossil fuels and increasing taxation of financial transactions. These are all corners of the activity and development potential of banks, particularly non-mutual banks.

It also wants to rely on a public banking center, currently embodied by the Caisse des Dépôts et Consignations (CDC), the Banque Postale (LBP) and Bpifrance, to grant financing at preferential rates to SMEs and VSEs. This measure is synonymous with increased competition on this market for established banks.

The left also wrote in its program that it wanted to “cap bank charges”. However, retail banking, which has already seen its margins reduced for several semesters, lives partly from this type of commission.

The left-wing union also plans to “generalize the taxation of superprofits.” With record profits over the last two years – 28 billion euros accumulated in 2022 and 30 billion euros in 2023 for Société Générale, BNP Paribas, Crédit Agricole, BPCE, Crédit Mutuel and La Banque Postale – banks could logically feel targeted.

The NFP program finally proposes “increased taxation of financial transactions” and wants to “subject to contributions” dividends and share buybacks, which BNP Paribas and Société Générale are fond of.

Which will further discourage holders of bank shares from keeping them in their portfolios.

(With AFP)