INVESTMENT FINANCE BEYOND BANK DEBT: A FRENCH EXCEPTION? JOINT - PowerPoint PPT Presentation

INVESTMENT FINANCE BEYOND BANK DEBT: A FRENCH EXCEPTION? JOINT BDF/EIB CONFERENCE OLIVIER GARNIER DIRECTOR GENERAL – ECONOMICS AND INTERNATIONAL RELATIONS 3 MAY 2018

GLOBAL TREND: CORPORATE ‘ SAVING GLUT ’… Source: Chen-Karabarbounis-Neiman (2017) 1

… RESULTING FROM THE FALL IN THE LABOUR SHARE OF GVA Source: Chen-Karabarbounis-Neiman (2017) 2

US: DEBT PRIMARILY FINANCES SHARE BUYBACKS RATHER THAN CAPEX (WHICH IS FINANCED BY INTERNAL FUNDS) US Nonfinancial Corporate Business: US: NFC total debt & equities net increase in liabilities (outstanding amounts, as % of GDP) ( 4-Q cumulated flows, in USD Bn) 160 600 140 400 120 200 0 100 -200 80 -400 60 -600 40 -800 20 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 Loans Debt Securities Corporate Equities Equities Total Debt (Loans + Securities) 3

FRANCE: AMONG THE VERY FEW ADVANCED ECONOMIES WHERE NFC S REMAIN NET BORROWERS NFCs net lending/net borrowing (% of NFC GVA, 4qms) 15 10 5 0 -5 -10 -15 -20 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 DE ES FR IT UK Source : Eurostat 4

NFC INVESTMENT AND SAVING: GERMANY VS . FRANCE Non Financial Corporate sector saving and investment rates (as % of value added) Germany France 24% 24% 24% 24% 23% 23% 23% 23% 22% 22% 22% 22% 21% 21% 21% 21% 20% 20% 20% 20% 19% 19% 19% 19% 18% 18% 18% 18% 17% 17% 17% 17% 16% 16% 16% 16% 15% 15% 15% 15% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2000 2002 2004 2006 2008 2010 2012 2014 2016 NFC investment rate (% VA) NFC investment rate (% VA) NFC savings rate (% VA) NFC savings rate (% VA) Source: Eurostat 5

FRANCE: NFC DEBT RATIO HAS BEEN CONTINUING TO RISE IN THE AFTERMATH OF THE GREAT FINANCIAL CRISIS Nonfinancial Corporate Debt/GDP (%) NFC Debt/GDP Cumulated changes (in pp) 120 110 30 22.2 20.0 100 20 16.4 14.3 90 11.3 10 80 0.2 70 0 -1.7 60 -10 -8.7 -9.5 50 -20 40 Q3 2017 / Q1 2000 -30 30 Q3 2017 / Q1 2011 20 -40 -39.4 -50 Germany Spain France Euro area Italy Germany Spain France Euro area Italy Source: Banque de France. Last observation: 2017 Q3 6

THE DISINTERMEDIATION OF NFC DEBT IS MUCH MORE ADVANCED IN FRANCE THAN IN THE REST OF THE EURO AREA EA Non-financial corporate bonds outstanding Share of total Share of bonds Outstanding euro area in total NFC bonds (€ bn) market (%) debt (%) Feb 2018 Feb 2018 Q3 2017 Germany 149 14 13 France 495 47 30 Italy 131 12 11 Spain 40 4 4 Euro area 1060 100 15 7

NFC EQUITY FINANCING IS MORE DEVELOPED IN FRANCE THAN IN THE REST OF THE EA, BUT HAS ROOM TO EXPAND Nonfinancial Corporate Equity (% of GDP) 140 120 100 80 60 40 1999Q4 2001Q4 2003Q4 2005Q4 2007Q4 2009Q4 2011Q4 2013Q4 2015Q4 2017Q4 France EA US 8

FRANCE: SME S HAVE SIGNIFICANTLY DELEVERAGED OVER THE PAST RECENT YEARS France : Nonfinancial Corporate Gross Debt to Equity ratios in % (by size) 170 160 150 140 130 120 110 100 90 80 1999 2001 2003 2005 2007 2009 2011 2013 2015 SME MID-TIER LARGE OVERALL Source: Banque de France, FIBEN database, november 2017 9