French banking shares fell sharply on Monday after President Emmanuel Macron called early general elections. This follows the centrist coalition's poor performance in Sunday's European Parliament elections.
Societe Generale shares were down 8 percent by late afternoon Paris time, while BNP Paribas and Credit Agricole were down 5.5 percent and 4.4 percent respectively.
Banking shares led France's CAC 40 index lower, dropping as much as 2.4 percent, its biggest drop in more than a year, as investors reacted to the possibility of a government led by Marine Le Pen's far-right party.
Preliminary results showed that Le Pen's National Rally won 31.5% of the vote, well ahead of President Macron's centrist coalition, which got 14.5%.
Investors are concerned about National Rally's “interventionist economic policies,” Morningstar equity analyst Johan Scholz said in emailed comments to reporters.
“In many European jurisdictions, banks have become easy targets for populist policies such as temporary taxes and limits on dividends and share buybacks,” Scholz said.
France's first round of parliamentary elections will be held on June 30 and July 7. In the most recent 2022 parliamentary elections, Macron's centrist coalition won the most seats but fell short of a majority in the National Assembly, resulting in France's first minority government since 1993.
The outcome of the election will not affect President Macron's position as he has three years left in his term. Macron won the 2022 presidential election with 58.55% of the vote, beating Marine Le Pen, who received 41.45%.
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European Central Bank supervisory chief Claudia Buch warned on Tuesday that many euro zone banks still do not meet accounting rules for provisions needed to protect against loan losses.Despite some progress being made in taking climate risks into account.
“While progress has been made, particularly in the area of climate and environmental risks, many banks are still far from meeting the expectations of IFRS 9,” Buch told ECB delegates.
IFRS 9 requires banks to set aside prepayment reserves when making loans and to increase these reserves if there are signs of default.
While the percentage of unpaid loans has fallen to an all-time low since the 2008 financial crisis, high interest rates and geopolitical risks, including the war in Ukraine and trade turmoil with China and the United States, are raising new regulatory concerns.
Buch criticized banks for relying too heavily on broad “overlays” — general provisions for new risks — that don't accurately reflect differences in specific sectors, and said many banks have failed to properly reclassify loans under IFRS rules that classify them into three tiers: performing, nonperforming and non-performing.
“Sound risk management in banks requires improved use of overlays to more accurately consider the impact of new risks, the use of simulations and scenarios, and improved phasing,” Book said.
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HSBC has added more than 300 employees to its China workforce following the completion of its acquisition of Citigroup's consumer asset portfolio in mainland China.
The acquisition includes investment assets, deposits and customers across 11 major cities in mainland China, all of which will be integrated into HSBC's business.
Mainland China is becoming a major contributor to HSBC's wealth management business: In the first quarter of 2024, the region saw a 53% increase in assets under management and a more than 30% increase in its wealth management client base year-on-year, according to a statement from the bank.
The deal, first announced in October, involves managing about $3.6 billion in deposits and investment assets.
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Societe Generale struggles to agree deal for securities services unitPotential bidders were reluctant to meet the price set by the French bank, Reuters reported, citing anonymous sources.
Societe Generale has been actively pursuing a sale of Societe Generale Securities Services since last year as part of CEO Slavomir Krupa's broader strategy to divest assets and streamline the bank's operations, industry sources said.
Media reports said Societe Generale was seeking more than 1 billion euros for the unit.
