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Investing.com -- French retail banking is showing clear signs of recovery, with Société Générale (EPA:SOGN) best positioned to benefit among listed peers, Barclays (LON:BARC) analysts said in note dated Thursday.
According to the report, revenues in French retail banking began to accelerate in the second half of 2024, with both net interest income (NII) and fees contributing.
The analysts expect this recovery to continue through 2027, citing improved mortgage margins, a more stable deposit mix, and a steepening yield curve.
Barclays projects NII in French retail operations will rise between 2024 and 2027 by 26% at SocGen, 19% at BNP Paribas (OTC:BNPQY), and 10% at Crédit Agricole SA.
Mortgage margins have returned to positive territory, and deposit growth has remained resilient despite earlier pressure from high-yield regulated savings like the Livret A.
The analysts expect the Livret A rate to decline further, potentially supporting lower deposit costs and encouraging asset flows into fee-generating products.
Fee income is expected to increase by 13–15% at the three banks between 2024 and 2027, driven by renewed inflows into mutual funds and life insurance policies.
Barclays cited record net inflows into life insurance in early 2025, including €5.8 billion in February, the highest for that month in two decades.
SocGen also leads in the proportion of unit-linked contracts in life insurance assets under management, a segment that generates higher margins and lower capital consumption.
Cost reductions are expected to contribute to the recovery. France maintains one of the highest bank branch densities in Europe, despite average internet banking adoption.
Barclays noted SocGen has already cut its branch network significantly, while BNP Paribas plans to reduce branches by one-third by 2030.
Costs relative to risk-weighted assets remain high across French networks, especially at SocGen, indicating room for further rationalization.
Return on equity (ROE) for French retail operations remains below the cost of equity (COE) for most banks, but Barclays forecasts a rebound. Only LCL, Crédit Agricole’s retail unit, posted double-digit ROE in 2024.
By 2027, Barclays expects returns to improve across the board, with SocGen’s French retail banking return on tangible equity (ROTE) forecast to be the highest among the listed peers.
French retail banking accounts for around 33% of SocGen’s revenue and 30% of its profit before tax, compared with 13% and 10% respectively at BNP Paribas, and 15% and 10% at Crédit Agricole SA.
Barclays estimates French retail banking will drive 72% of SocGen’s profit before tax growth from 2025 to 2027, versus 40% at Crédit Agricole and 23% at BNP Paribas.
Barclays rates SocGen and BNP Paribas “overweight” and Crédit Agricole “equal weight,” citing SocGen’s stronger exposure to the segment and its earnings sensitivity to the ongoing retail recovery.