financial services network, La Banque Postale, has been very short
but very eventful. As it accelerates efforts to expand into
insurance and become a fully-fledged French retail bank, its future
prospects look set to attract as much attention as its
controversial creation. Rodrigo Amaral
reports.
La Banque Postale, the banking subsidiary of France’s state-owned
post office La Poste, which launched in January 2006 despite
vehement opposition from the country’s commercial banks, is now the
largest French bank by branches (around 17,000) and by customers
(over 29 million).
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But in a recent interview on French TV, La
Banque Postale (LBP) CEO Patrick Werner stressed the firm faces
significant challenges in the near future. On the one hand, LBP has
been allowed by the government to broaden its service offerings
into areas previously regarded as off-limits. But the competitive
advantage the entity enjoys over its private sector rivals with the
Livret A account is to be lost. The Livret A is a tax-free savings
product guaranteed by the government and held by more than 46
million French citizens, currently distributed by only LBP and the
mutual Caisse d’Epargne.
“2008 is being determined by two important
decisions taken last year,” said Werner. “The first was the opening
of the Livret A market to all banks from January 2009. And the
second was the authorisation granted to La Banque Postale to offer
consumer loans, something we should start offering by the end of
2009 or the early months of 2010.”
The choice of a partner to help it move
into the credit market is one of the main challenges faced by the
company this year, he said.
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 ($2.32). Its
liberalisation, said Werner, will have an “important” impact on the
firm’s activities. The only similar savings product on the market
is Livret Bleu, offered by the mutual Crédit Mutuel.
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By GlobalDataOf concern to Werner is a perceived lack
of a level playing field. 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 client, no matter the size
of the deposit.
At stake is a market which LBP estimates
generates 60,000 new customer accounts a year, which LBP will be
forced to share with an increased number of rivals. In addition,
Werner is concerned that existing LBP Livret A account holders may
elect to transfer their business to other banks.
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 six 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.
According to Werner, the French government
is sympathetic to LBP’s plight and has sought authorisation from
the European Union (EU) to make payments to the bank to compensate
for this obligation.
“But it is still far too early to say what
will be the effect of the changes to the results of La Banque
Postale,” Werner argued.
France’s most popular savings
product
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 – as well as an
opportunity to weaken their new rival – and last year gained the
support of the EU which ordered the French government to end the
distribution duopoly.
But despite the expected loss, LBP
believes it can attract business away from the private sector
banks, as it continues its transformation to a fully fledged retail
bank.
In addition to entering the consumer
finance sector, for which LBP received government approval in
November 2007, the bank has also recently received authorisation to
offer property and casual insurance for private clients. The green
light was given by finance minister Christine Lagarde at the end of
April, leading to LBP embarking on a search for an insurance sector
partner; according to the bank it will aim to grab around 6 percent
to 8 percent market share for home and auto insurance.
It has said it will be well on the way to
achieving such a market share by 2010, and a range of life
insurance policies has already been launched by the bank.
Moreover, the French government’s policy
of persuading LBP to seek partnerships with private sector rivals
has borne fruit, with LBP agreeing to form a joint electronic
payments venture with SocGen in January.
LBP is also expanding its wealth
management product range and has signed an agreement with wealth
management specialists Oddo & Cie to set up a dedicated
subsidiary, La Banque Postale Gestion Privée. According to LBP, the
new company has already attracted around 700,000 clients of whom
9,000 have each invested sums in excess of €500,000.
Another sector of the market LBP is
targeting is the youth segment. Its Bagoo range of accounts are
aimed at customers aged 16 to 25, and had been snapped up by
900,000 customers by the end of 2007.
Strong results in
2007
In total across its product range, LBP
client numbers increased by a net 850,000 in 2007, a 13 percent
increase over 2006. Despite the credit crunch, LBP produced strong
results in 2007, a year which it described as producing
“sustainable development”, with net banking income up 5 percent
year-on-year to €4.75 billion and earnings before interest and tax
up by 17 percent to €514.5 million.
The bank also continues to stress that, in
contrast to some of its best-known rivals, it has escaped unscathed
from the subprime crisis. Indeed, for some time LBP was even touted
as a possible “white knight” to help Société Générale to get out of
the doldrums after its €4.9 billion trading scandal disclosed in
January.
While the international business press
concentrated on the possibility of a hostile bid for SocGen from
banks including BNP Paribas, Crédit Agricole, UniCredit, Santander,
and Intesa Sanpaolo, France’s track record for old-fashioned state
intervention to create a national champion led to speculation that
LBP could take a major stake in SocGen along with a French partner
such as the insurer Axa.
If France was to witness anything
approaching the sort of consolidation that has transformed Italy
over the past two years, La Banque Postal will almost definitely
have a significant role to play.
