An ambitious development strategy, working closely with Groupe BPCE
Crédit Foncier’s strategy is based on five main points. Laid out at end-2011 for a period of five years, its implementation was ramped up in November 2013 when the parent company, Groupe BPCE, set in motion its “Growing differently” strategic plan. Two main reasons behind this acceleration were stiffening regulatory constraints and an economic and financial environment that encouraged asset disposals.
1st point: A sales strategy that has already produced impressive results
The first strategic point is the development of the core business in France serving Crédit Foncier clients and those of the group’s retail banking networks. It also includes an ambitious sales plan in France focused on:
- strengthening Crédit Foncier’s leading position on the market for social homeownership;
- aligning strategies implemented by its two sales networks (own network and network of franchisees); the last step in this strategy consisted of, at end-2013, adopting a single commercial brand, Crédit Foncier, with 260 branches in France;
- building a multi-channel relationship with its customers and the development of a web-based investment platform, that adds to the geographic coverage of the 260 branches and a partnership with over 7,000 property professionals (real estate brokers, individual home builders, etc.);
- the creation of Socfim, a leader in property development finance.
Commercial performance in 2013 underscored the relevance of this first strategic point and the commercial strategy that has been implemented since end-2011.
2nd point: €9.8bn in international assets have been sold since end-2011
The termination of international activities and the reduction of the balance sheet are part of the second strategic point. Deleveraging enabled Crédit Foncier to reduce its market footprint and thus improve its ability to refinance its business under optimal conditions and prepare for compliance with the Basel III leverage ratio. Taking advantage of tightening credit spreads on the market, Crédit Foncier decided to ramp up its disposals of international assets in 2013. The management in run-off mode of international activities was anticipated to a large extent, as €9.8bn in assets had been sold by end-2013, which surpassed the goals set by Crédit Foncier and BPCE.
3rd point: Developing new sources of refinancing
Crédit Foncier is also actively developing, which is the plan’s third point, new refinancing methods in addition to obligations foncières (covered bonds). The regulations that will soon go into effect encourage banks to stabilise the size of their balance sheets. If they wish to continue to develop their lending activities (which is the case for Crédit Foncier) and meet the demand of their customers/borrowers, lenders must look for new sources of refinancing, particularly syndication and securitisation, with the latter being particularly well adapted to loans granted to individuals.
4th point: Improving Crédit Foncier’s resiliency
The fourth point is that of cost savings aimed at improving Crédit Foncier’s ability to withstand adversity and enabling its business lines to attain a sufficient level of profitability. The strategic plan seeks to reduce expenses by 15% (i.e. €90m in cost savings) over six years. At end-2013, Crédit Foncier was ahead of the initial schedule.
Cost savings have focused on three areas:
- information technology savings by merging Crédit Foncier’s IT system with that of the Caisses d’Epargne, with the cut-over planned for 2015;
- savings on personnel expenses, primarily focused on a plan for managing retirements, which was very popular (88%);
- savings from reducing property-related expenses.
5th point: Strengthen synergies with Groupe BPCE
The fifth and final point is based on developing synergies with Groupe BPCE.
Crédit Foncier brings to the group its leadership position in France on the social homeownership market as well as its exclusive access to a market resource for raising long- and medium-term funding from a highly-diversified investor base.
Belonging to Groupe BPCE is an opportunity for Crédit Foncier to develop its business lines and mobilise expertise on a number of levels:
- Compagnie de Financement Foncier, a société de crédit foncier and a wholly-owned subsidiary of Crédit Foncier, is now available to all Groupe BPCE banks (Caisses d’Epargne, Banque Populaire banks, Natixis), whose excellent market reputation enables them to refinance their long-term liabilities under the best possible conditions. Eventually, nearly 50% of Compagnie de Financement Foncier’s activity will be dedicated to refinancing group entities, other than Crédit Foncier;
- Granting property loans to individuals who are clients of the Caisse d’Epargne and Banque Populaire networks: Crédit Foncier offers an alternative to the structural changes the Group’s retail banks are facing. Regulatory changes (Basel III) and pressure on ratios will, indeed, encourage network banks to reduce the percentage of long-dated loans on their balance sheets.
- In the businesses of financing local authorities and social housing, synergies have been developed in partnership with regional banks. These synergies could include the regional dimension of the group’s retail banks and, in particular, the expertise developed by Crédit Foncier in the area of syndication;
- Synergies have also been developed between the group’s retail banking networks and Crédit Foncier Immobilier and Socfim in both real estate services, particularly, on the one hand, the valuation and consultancy activities and, on the other, brokerage and appraisals of property assets of all Groupe BPCE entities, and in financing property development.