Bad loans and high delinquency rates set to make French banking industry suffer

Forecasts for mortgage balances in France show a decline of 5.8% in 2020, down from 4.9% growth previously, as the COVID-19 pandemic continues to cause disruption. It is expected that it will take until 2021 for the market to register growth again, as it forecasts a further 1.3% decline in 2021, according to GlobalData, a leading data and analytics company.

French banking balance sheet will be hit directly by COVID-19 due to the scale and length of disruption, with loans and mortgages being key concerns. The overall economy is set to struggle due to severe disruption to tourism – a major industry for the country.

Resham Karira, Retail Banking Analyst at GlobalData, comments: “The residential mortgage market faces a particular set of risks due to COVID-19, and the most immediate of these is a lack of short-term liquidity.”

Banks could also see a rise in the delinquency rate, resulting in higher non-performing loans as retail customers and small and medium-sized enterprises (SMEs) are especially vulnerable to this disruption.

Karira continues: “GlobalData also expects credit card balances to decline by 1.5% in 2020. The decline in overall consumer spending precipitated by the outbreak and the lockdown in France will partially be offset by a rise in online purchases, as wary consumers stay home and use the online channel to purchase foods in order to avoid exposing themselves to disease vectors. This will drive a rise in credit card transactions, but any growth will be hampered by an overall decline in consumer spending.

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