Crédit Mutuel continues tackling the issues facing the French economic and social landscape

In a challenging economic, political and social environment, the French banking sector must learn how to adapt in order to remain profitable and relevant

While the gilet jaunes protests in France have caused considerable uncertainty, Crédit Mutuel's goal is to protect customers' assets and provide the means for them to reach their desired future 

Following the unprecedented upheaval of the financial crisis, the global banking sector has made significant strides towards creating a stable future. Now, more than 10 years on from the crash, the banking industry is enjoying increased stability, healthy profits and improved consumer confidence, thanks to ongoing efforts to enhance transparency and strengthen the customer service experience.

But despite this progress, the banking industry still faces myriad challenges and economic obstacles. The financial landscape is currently marked by persistently low interest rates, stringent regulatory controls and increased competition from fintech start-ups and non-banking competitors. What’s more, this year is set to be something of a tipping point for the financial services industry, with new technologies rapidly reshaping the sector and redefining how customers interact with their banks.

The technological transformation of the industry had created a wealth of both opportunities and obstacles for financial institutions: those that successfully integrate these emerging technologies into their businesses are sure to reap the rewards of their efforts, but those that fail to do so will risk lagging behind their forward-thinking peers. In this challenging economic climate, adaptability is the key to longevity, and banks across the globe must learn to continually reinvent themselves in response to the evolving environment. It is only through flexibility and innovation that banks of all sizes can hope to remain profitable and relevant in the years to come.

New technologies are rapidly reshaping the financial services sector and redefining how customers interact with their banks

Weathering the storm
The banking industry may be enjoying a period of increased stability, but this could very well be a short-lived economic chapter. According to economic analysts, a second major financial crisis could be on the horizon, prompting financial institutions to consider how they would prepare for such an event. In its Global Financial Stability Report, the International Monetary Fund (IMF) warned that rising debt levels, an increase in trade tensions and widespread political uncertainty could leave the banking sector exposed to numerous medium-term risks. Indeed, with ultra-low interest rates pushing global debt higher than pre-crisis levels, mounting financial vulnerabilities threaten to upset the stable progress made by the banking industry in recent years. If another financial crisis is indeed a possibility, banks must ready themselves for this eventuality, and must take action to reduce their exposure to risk and ensure they are prepared for even the worst economic eventuality.

At Crédit Mutuel, we pride ourselves on our strength and stability in testing times. We believe that our robust performance stands us in good stead to weather any financial storm. As an industry leader with more than 100 years of banking experience, Crédit Mutuel once again demonstrated its financial strength in 2018, recording a net income of €3.5bn ($3.9bn) for the year. This represents a year-on-year net income growth of 17.2 percent, reflecting the company’s remarkable financial performance across its central body and its 19 autonomous federations.

Despite the current challenging economic environment, Crédit Mutuel is proud to have attracted more than 900,000 new customers in 2018, in addition to creating more than 1,500 jobs across the business. We are therefore doing remarkably well as a group – largely as a result of our solid business model, which is centred on sustainability and growth.

Our group shareholders’ equity also rose 5.6 percent to reach an impressive €54bn ($60bn) in 2018, enabling Crédit Mutuel to post a strong CET1 solvency ratio of 17.5 percent. These results confirm that Crédit Mutuel’s financial solidity meets the very highest European standards, placing the group in a strong position to withstand any external economic shocks.

Aside from these financial results for 2018, Crédit Mutuel’s solidity was also emphasised during the stress tests that were carried out by the European Banking Authority in November. These tests – which are designed to determine how a bank might perform in adverse economic conditions, such as a sudden recession – placed Crédit Mutuel first out of all French banks in the November 2018 round of testing. The bank also placed fifth out of all commercial banks in the eurozone, demonstrating its resilience among its peers and its solid positioning in the case of any future economic downturn.

Crédit Mutuel’s results prove that its diversification strategy is a success. We will now continue to reinvent our business well beyond its historical borders while retaining a focus on the success of all its distinct business lines (see Fig 1). This is the outcome of several years of major transformation of all the bank’s subsidiaries, and thanks to the sincere commitment of all the people present in all our territories. Let’s not forget that it is unity and solidarity that make our group shine.

With a history in France spanning back more than a century, Crédit Mutuel is not indifferent to the social unrest currently being displayed in France, nor to the malaise expressed by the French people. We believe that the purpose of a bank – especially for a cooperative bank such as Crédit Mutuel – is to always serve its customers and accompany them at all stages of their lives. The scale and nature of this crisis, however, reveals a level of inequality that is jeopardising our vital social contract. The role of a bank has therefore never been more important than in these testing times. We must refuse the fragmentation of society, and we must give back to all our customers the ability to have plans, and thus to have confidence in oneself and in one’s future.

Our role, especially now, is to both protect what has been acquired and to provide the means for customers to reach their desired future. At Crédit Mutuel, we have a simple aim: to be a bank for everyone.

Time to transform
Crédit Mutuel has recently renovated its governance structure. Our organisation can now be proud of the association between autonomy and solidarity through its ability to offer services that have been adapted to suit everyone. Crédit Mutuel is a strong and diversified group, built around a united brand that bears the constantly renewed trust of its customers and members.

Today we are entering a new dynamic, thanks to a modernised mutualism model that can meet the needs of all our customer-members. We are ready to face the future with a model that is able to take into account today’s challenges. Our structure and performance have allowed us to adapt to the world around us as and when it changes.

In 2018, we accelerated the transformation of our business model by using a diversification strategy across all of our business lines. We have strengthened our position as a local multi-service bank and have placed an emphasis on our technological transformation in order to constantly improve the relationship between customer and advisor. This relies in particular on the development of artificial intelligence (AI) in 100 percent of our business lines, and on the constant enrichment of the functionalities of our websites and mobile applications.

We are convinced that technology must serve the people, not the other way around. Our challenge is to give our advisors time to more closely match the needs of our customers. The very foundation of our business is the relationship we have with our customers; thanks to technology, our advisors will be able to fully devote themselves to their clients and thereby forge privileged links with the people they assist on a daily basis.

As part of an ongoing commitment to expanding its digital portfolio, Crédit Mutuel has strengthened its strategic partnership with IBM. Together, we have launched the Cognitive Factory – an innovative taskforce that unites AI-specialised engineers with business experts from the Crédit Mutuel Group. The Cognitive Factory builds on the successful partnership between two industry leaders and marks an exciting new chapter in Crédit Mutuel’s digital development. As the company commits to a digitally diversified future, our customers can rest assured that they will remain at the core of our business.

We believe that the purpose of a bank – especially for a cooperative bank such as Crédit Mutuel – is to always serve its customers and accompany them at all stages of their lives

The Crédit Mutuel model combines the very best of traditional banking and digital banking; this will remain the case in 2019 and beyond. We understand that customers want all of their interactions with their bank to be smooth, informative and highly personalised, whether that be in person, over the phone or through online services. By employing AI and other cutting-edge tools, our dedicated advisors can strengthen this relationship with consumers, making the customer service experience more streamlined and effective for everyone involved.

A bright future
While we are certainly proud of our successes, we are also constantly looking to build on our achievements and improve our services for our 32.5 million customers. Despite a challenging economic climate, along with the disruption caused by technology firms, we are confident that Crédit Mutuel will keep flourishing, thanks to its adaptability and innovative outlook. The financial landscape is always changing, and so are we.

As we look to the future, we plan to continue capitalising on Crédit Mutuel’s unique strengths – namely, our 5,700 points of sale, our thriving corporate banks, our dedicated account managers, the quality of our services, and our loyal staff, who are highly trained and always in direct contact with our customers.

By 2023, we aim to increase our net income to more than €4bn ($4.45bn) and our capital ratio to 18 percent. While bancassurance remains our core business, our sector diversification is favourable and our specialised business lines continue to be profitable. Furthermore, we remain attentive to opportunities both in France and the eurozone more generally.

We are aware of the challenges facing all modern banking institutions, but we believe our financial solidity and our inspired employees will guarantee Crédit Mutuel continued prosperity, even in the most testing circumstances. At Crédit Mutuel, success is built every day, in every branch of our network, and at every point of service.