N° 51 : French banks’ lending to the professional real estate sector in 2014

While France continues to account for over 70% of new loans, its share contracted for the third consecutive year, due to the much stronger lending growth in other countries (+28.1%), in particular in the United States and in Asia, than in France (+2%). While some of the growth observed outside the euro area can be attributed to exchange rate effects (appreciation of sterling and the US dollar), volumes also rose sharply. Furthermore, new lending was driven by investors and property companies whose share (40.5% - up steadily since 2011) is now almost equal to that of property developers (41.7% - falling constantly since 2008). Lastly, while residential property continues to account for the bulk of new lending, its share fell in 2014 to the benefit of offices.

Total exposures increased slightly (+1.7%) to EUR 185.8 billion. Two-thirds of exposures were to France, and the remaining third was split between Europe and the rest of the world. In Europe, outside France, the main recipients were Belgium and Italy while the United States was the main recipient outside Europe. Moreover, investors and property companies continued to account for the bulk of exposures (45.2%), with their share rising by a further 0.5 percentage point in 2014. Lastly, the breakdown of exposures by asset type has changed slightly due to the rise in residential property, which remains by far the main recipient of new lending.

The quality of exposures has improved as the non-performing loan ratio fell to its lowest level since 2009, to stand at 6.56%. This chiefly reflects the resolution of disputes or their out-of-court settlement, as favourable market conditions facilitated asset sales by troubled borrowers. Furthermore, the coverage ratio increased slightly to 37.2%, its highest level since 2008.

Lastly, French banks’ exposures to illiquid assets inherited from the financial crisis are now minimal.