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Worst may be over for France's big 3 banks as cost of risk peaked in 2020

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Worst may be over for France's big 3 banks as cost of risk peaked in 2020

The cost of risk at the largest three banks in France by assets has been on the rise since 2018, reaching its peak in 2020 through the COVID-19 pandemic, according to S&P Global Market Intelligence data.

BNP Paribas SA, Crédit Agricole SA and Société Générale SA have said that the worst is behind them, and that cost of risk — the main metric for following loan loss provisioning efforts — is expected to gradually improve from 2021 as the economy returns to normal. In a report published in January, S&P Global Ratings said French banks are generally capable of absorbing COVID-19 shocks in 2021, but that a quick return to pre-pandemic profitability levels is unlikely, with the cost of risk expected to remain elevated in 2021 but to come in lower than in 2020.

For Crédit Agricole and SocGen, cost of risk in 2020 peaked in the second quarter at €840 million and €1.28 billion, respectively. BNP Paribas' cost of risk reached its highest level in 2020 during the fourth quarter, at €1.60 billion.

BNP Paribas' cost of risk amounted to €2.76 billion and €3.20 billion in 2018 and 2019, respectively, and hit €5.72 billion in 2020. Crédit Agricole's cost of risk stood at €1.08 billion in 2018, increasing to €1.26 billion in 2019 and to €2.61 billion in 2020. For SocGén, it increased to €1.28 billion in 2019 from €1.01 billion in 2018, rising further to €3.31 billion in 2020.

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