intensifying their efforts to grow customer numbers in advance of
the opening up of the Livret A market to all banks from January
2009. Liberalisation of the country’s savings regulations ends a
stranglehold enjoyed by a small number of banks dating back to
1818, reports Rodrigo Amaral.
A French savings war is set to break out with the ending of the
Livret A duopoly, currently enjoyed by La Banque Postale (LBP), the
banking subsidiary of France’s state-owned post office La Poste,
and co-operative Groupe Caisse d’Epargne.
Livret A, the tax-free savings product guaranteed by the
government and held by more than 46 million French citizens,
currently offers a guaranteed interest rate of 4 percent, subject
to review every six months.
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The Livret A market dates back to the early 19th century and is
widely favoured by less wealthy customers – accounts can be opened
with as little as €1.50 ($1.94). Its popularity is based largely on
its safety, attracting cautious savers, as well its guaranteed
interest rate.
The current financial crisis, from which French banks have not
been immune, has increased the popularity of the product.
Banque de France, the French central bank, has reported more
than €10.6 billion was deposited in Livret A accounts in the year
to the end of September, the fastest rate of deposits growth in
Livret A’s history.
At the end of the third quarter of this year, total Livret A
savings amounted to €130.9 billion. French savers have shown a
marked preference for the safety of Livret A; in contrast,
competing investments such as life insurance products have been in
decline.
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By GlobalDataThe shock of high-profile events
Groupe Caisse d’Epargne, which is currently in the throes of a
shotgun merger with Banque Populaire after its recent €600 million
trading scandal (see RBI 600), reported that 69,100 new
accounts were opened in the second half of September alone, as
French savers digested the shock of a number of high-profile
events, such as the collapse of investment bank Lehman Brothers and
worsening conditions worldwide.
LBP has also reported a much higher than usual rate of new
account openings.
The country’s private sector banks have long sought to gain a
share of France’s most popular savings product to boost their own
retail results. And while that campaign has finally borne fruit and
they will be able to start offering the product on 1 January, they
are already heavily marketing it in the French market. Examples
include:
• BNP Paribas is committing itself to pay 100 basis points above
the official Livret A rate throughout 2009 for holders of its
Livret A+1 account. This will mean an interest rate of 5 percent,
tax-free, for deposits up to €15,300, the maximum permitted for
Livret A accounts;
• Société Générale has launched the Livret Avant-Première
account paying 5.63 percent gross, equivalent to 4 percent net,
until the end of the year. Customers aged below 25 also receive a
€20 account incentive if they open a Livret A account before 31
December;
• ING Direct has been paying a competitive 6 percent gross for
three months to customers who opted for its Livret Épargne Orange
product before 30 November 2008;
• Cortal Consors, an online subsidiary of BNP Paribas, also
offers 6 percent gross, but for a six-month period, for deposits of
at least €1,000 in its Livret Euro account; and
• AXA Banque is offering a €40 bonus to clients who operate a
Livret Axa Banque until 31 December 2008 and keep at least €150 in
the account until the end of February 2009.
Not without controversy
The savings law liberalisation has not been without controversy.
While all banks will be able to participate in the Livret A market,
only La Banque Postale will be forced to open Livret A accounts for
any customer, no matter the size of the deposit (see RBI
593).
LBP’s results are likely to take a hit in 2009 as a consequence
of the legislative changes, with some French banking analysts
estimating that approximately 6 out of every 10 Livret A accounts
at the bank have a deposit balance of less than €150 – amounting to
0.7 percent of the volume of the bank assets but at a cost of
around 50 percent of the bank’s management expenses to
administer.
New opportunities
Cross-sell opportunities will also open up for the private
sector French banks in 2009, according to Samshad Rasulam, a
banking expert at Paris-based market research company Xerfi.
“The challenge is to attract those clients who have a Livret A
account, but not a current account,” she said. “The Livret A won’t
bring many profits to banks, but it can help them to get new
clients. After that, they will do all they can to try and sell them
other products.”
According to Rasulam, Crédit Mutuel reports that two thirds of
its Livret Bleu account holders – its own established version of
the Livret A product – also have a current account and other
products offered by the bank.
Rasulam argues that banks with comprehensive branch networks are
the most likely to make inroads in the Livret A market.
Crédit Agricole, for example, with more than 9,000 branches, the
largest network in the country after La Banque Postale, is well
placed to benefit and already offers other regulated saving
products such as the Livret de Dévelopement Durable, an
eco-friendly, tax-free saving account.
“Crédit Agricole will have a position of strength and could be
able to attract a significant share of the Livret A market,” she
added.
As for the interest rate to be offered by Livret A after
February 2009, banks are not commenting.
The interest rate is set to be fall in February, as it is
calculated according to the European Central Bank basic rate –
which has recently dropped by 50 basis points to 3.25 percent –
Interbank rates and inflation, all on the slide.
But the decision to cut the Livret A official rate could be
sensitive at this time; politicians are already making a fuss about
the wisdom of reducing savings interest rates for French
savers.
