BPCE: Attractive Yield Opportunity Backed by Strong Investment-Grade Fundamentals

Highlight

• Strengthened European banking franchise: Following the completion of the novobanco acquisition in April 2026, BPCE became the second-largest banking group in France and established Portugal as its second domestic retail banking market, further expanding its European footprint.

• Strong earnings growth across business lines: BPCE delivered 10% YoY growth in Net Banking Income (NBI) to €13.9bn in 1H26, supported by broad-based growth across all four business lines. 

• Improved cost efficiency: Revenue growth outpaced expenses, leading to a 4.4% improvement in cost-to-income ratio to 62.9%, while net income increased 30% YoY to €2.36bn in 1H26.

• Resilient asset quality with diversified loan portfolio: NPL ratio stood at 2.8%, supported by a diversified loan portfolio across corporate, retail and institutional customers.

• Strong capital and liquidity buffers support credit resilience:  BPCE maintained a strong CET1 ratio of 15.5%, a 492bps capital buffer above regulatory requirements, and €332bn liquidity reserves with LCR at 141%, supporting its strong investment-grade credit profile.

• Recommendation: Investor may consider BPCE bond offer attractive yield range of 2.9% to 6.7%

Company Overview

BPCE SA (BPCE) is a leading French banking group headquartered in Paris. Established in 2009 through the merger of Groupe Banque Populaire and Groupe Caisse d'Epargne, the group operates a universal cooperative banking model and serves approximately 36 million customers worldwide.

Following the completion of its acquisition of Portugal's fourth-largest bank, novobanco, in April 2026, BPCE became the second-largest banking group in France, behind BNP Paribas, and the fourth largest in the Eurozone. The acquisition also established Portugal as BPCE's second domestic retail banking market, further strengthening the group's European presence and expanding its retail banking franchise.

Operating under a universal cooperative banking model, BPCE conducts its activities through four principal business lines: Retail Banking in France, Retail Banking in Europe, Insurance and Asset Management, and Corporate & Investment Banking (CIB), as outlined in Table 1.

Table 1: Overview of Groupe BPCE’s Business Activities and Key Entities

Entity	Core Function	Target Audience	Primary Products & Services
1. Retail Banking in France (RBF)
Banque Populaire	Entrepreneur- and SME-focused regional cooperative bank	Entrepreneurs, SMEs, professionals and retail customers	Business loans, working-capital & equipment finance, deposits, mortgages and insurance
Caisse d'Epargne	Retail- and community-focused regional cooperative bank	Households, SMEs, local authorities and social-housing organisations	Savings, mortgages, consumer & business loans, public-sector finance and insurance
Banque Palatine	Premium corporate banking and private wealth management	Mid-sized companies (ETIs) and high-net-worth business owners	Corporate finance, private banking, wealth management and advisory
2. Retail Banking in Europe (RBE)
Oney Bank	Digital payments and consumer finance	Consumers, retailers and e-commerce merchants	Buy Now Pay Later (BNPL) options, Consumer credit, instalment payments and payment solutions
Novobanco (Acquisition finalized 30 April 2026)	Full-service Portuguese retail and corporate bank	Portuguese households, SMEs and corporates	Mortgages, consumer & corporate loans, deposits and payments
3. Insurance and Asset Management (IAM)
BPCE Assurances	Insurance manufacturing and underwriting	Banque Populaire and Caisse d'Epargne customers	Life insurance, savings products, property & casualty insurance, protection, health and provident insurance
Natixis Investment Managers	Global asset management platform	Institutional investors, pension funds, and sovereign wealth funds	Active equity funds, fixed-income portfolios, real estate, and private equity investments
4. Corporate & Investment Banking (CIB)
Natixis Corporate & Investment Banking	Wholesale capital markets, advisory, and corporate financing	Large corporations, institutional investors, and sovereign entities	M&A advisory, debt syndication, derivatives trading, infrastructure financing
Source: BPCE, iFAST Compilation. Data as of 30 June 2026

BPCE Delivered Strong Growth Across Business Lines in 1H26

In 1H26 (June 26), Groupe BPCE continued the strong momentum achieved in 1H25 (June 25), delivering double-digit growth in net banking income (NBI) of 10% YoY. The strong performance was supported by broad-based growth across all major business segments (Table 2).

1. Retail Banking in France (RBF): Revenue increased 13% YoY to €8.4 billion, making RBF the Group’s largest revenue contributor at approximately 61% of total NBI. The increase was primarily driven by a 27% YoY rise in net interest income (NII) across the retail banking networks, supported by 2% YoY growth in loans outstanding to €738 billion. During 1H26, RBF acquired 415,000 new clients, while on-balance-sheet deposits and savings increased 2% YoY to €715 billion, demonstrating continued growth in both lending and deposit franchises.

2. Retail Banking in Europe (RBE): Revenue increased 94% YoY to €687 million, primarily reflecting the full consolidation of novobanco following the completion of its acquisition on 30 April 2026. The integration significantly expanded BPCE’s European retail banking franchise, while loans outstanding increased 7% YoY, reflecting continued business expansion across the region.

3. Insurance & Asset Management (IAM): Revenue increased 3% YoY to €2.3 billion. Insurance revenue rose 12% YoY, supported by a 13% increase in life insurance gross inflows to €9.9 billion. Meanwhile, Asset Management NBI increased 4% at constant exchange rates, with assets under management (AuM) exceeding €1.3 trillion at end-June 2026. The segment continued to provide a relatively stable source of fee-based income and contributed to the diversification of BPCE’s earnings base.

4. Corporate & Investment Banking (CIB): Revenue increased 5% YoY to €2.6 billion, supported by resilient performances across both Global Markets and Global Banking.

• Global Markets: Net revenue increased 9% YoY to €1.5 billion, primarily driven by a 44% YoY increase in Equity revenues to €570 million, supported by exceptionally strong derivatives performance. FIC-T (Fixed Income, Currencies and Treasury) also delivered resilient results, with contributions from Credit, Rates and Commodities partly offset by lower Treasury income.
• Global Banking: Net revenue increased 6% YoY to €1.1 billion, supported by growth across Global Trade (+27% YoY), Real Assets (+17% YoY) and Investment Banking (+5% YoY).

Overall, BPCE’s 1H26 performance demonstrates broad-based earnings growth across its business lines. The strong performance of RBF highlights the resilience of its domestic retail franchise, supported by higher NII, continued loan and deposit growth, and new client acquisition. Meanwhile, the consolidation of novobanco materially expanded BPCE’s European retail banking platform and strengthened geographic diversification. IAM continued to provide recurring fee-based income, while CIB delivered steady growth despite a more market-dependent revenue mix. Together, these businesses provide BPCE with a broader and more diversified earnings base.

Table 2: BPCE Delivered Double-Digit Growth Across Key Business Segments in 1H26

Business Line (€m)	1H25	1H26	YoY
Retail Banking in France (RBF)	7,499	8,441	+13%
Retail Banking in Europe (RBE)	355	687	+94%
Insurance & Asset Management (IAM)	2,197	2,264	+3%
Corporate & Investment Banking (CIB)	2,449	2,560	+5%
Corporate Center	120	(33)	N.M.*
Net Banking Income	12,619	13,919	+10%
*Not Meaningful Source: BPCE, iFAST Compilation. Data as of 30 June 2026

Revenue growth outpaced expenses, improving cost efficiency

Groupe BPCE's underlying operating expenses increased moderately by 4% YoY to €8.97 billion in 1H26, despite continued strategic investments, including the integration of novobanco. As Net Banking Income (NBI) growth of 10% YoY to €13.9 billion outpaced expense growth, the Group generated a positive jaws effect, resulting in a 4.4 percentage point improvement in its underlying cost-to-income ratio (CIR) to 62.9% in 1H26 (1H25: 67.2%) (Table 2).

The improvement was primarily driven by the Retail Banking & Insurance (RB&I) franchise, the Group's largest revenue contributor, accounting for approximately 82% of total NBI. RB&I operating expenses increased by only 4.1% YoY to €6.86 billion (1H25: €6.59 billion), while NBI grew strongly by 13.3% YoY to €11.39 billion. As a result, the combined RB&I cost-to-income ratio improved significantly by 5.4 percentage points to 60.2% (1H25: 65.6%), reflecting strong operating leverage and disciplined cost management.

Cost of risk increased 24% YoY to €1.5 billion, equivalent to 29bps in 1H26. The increase primarily reflects BPCE’s prudent and pre-emptive provisioning approach rather than a material deterioration in underlying credit quality. In 2Q26, BPCE recognized an additional 4bps of provisions for performing loans (Stage 1 and Stage 2), providing an additional buffer against potential credit deterioration amid an uncertain economic environment.

Overall, profitability rose in step with the top line. For 1H26, net income total €2,357 million, up 30% YoY, reflecting the combination of strong revenue growth and improved cost discipline, partly offset by a 24% YoY increase in cost of risk.

Table 3: Cost-to-income ratio improved across Groupe BPCE, led by Retail Banking & Insurance

	1H25	1H26	Year-on-Year Change (%)
RB&I: Net Banking Income (NBI)	10.05	11.39	+13.3%
RB&I: Operating Expenses (OpEx)	6.59	6.86	+4.1%
Combined RB&I: Underlying Cost to Income (%)	65.6%	60.2%	-5.4 pp
Corporate & Investment Banking (CIB): Net Banking Income (NBI)	2.45	2.56	+4.5%
Corporate & Investment Banking (CIB): Operating Expenses (OpEx)	1.52	1.57	+3.7%
Corporate & Investment Banking (CIB): Underlying Cost to Income (%)	61.5%	61.1%	-0.4 pp
Groupe BPCE (Overall): Underlying Cost to Income (%)	67.2%	62.9%	-4.4 pp
Source: BPCE, iFAST Compilation. Data as of 30 June 2026

Asset Quality Remained Resilient Amid Macro Uncertainty

BPCE's asset quality remained resilient and stable in 1H26. The Group's non-performing loan (NPL) ratio stood at 2.8% in 1H26, representing only a marginal increase of 0.1 percentage point compared with FY25 (December 2025). The Group's loan portfolio remains highly diversified, with no significant sector concentration risk. Corporate customers represented the largest portion of gross exposures at 30%, followed by individual customers (27%), central banks and sovereigns (14%), small businesses (7%), financial institutions (5%), and local governments (4%).

BPCE increased its total loan loss provisions from €15.7 billion in FY25 to €17.2 billion in 1H26, reflecting a prudent provisioning approach amid an uncertain economic environment. The Stage 3 cost of risk remained stable QoQ at 29 basis points in 2Q26, indicating contained credit deterioration in the impaired loan portfolio. Meanwhile, the Group maintained a cautious forward-looking stance by recording 4 basis points of provisions on performing loans (Stage 1 and Stage 2) to provide additional protection against potential future credit deterioration.

Strong Capital, Liquidity and Funding Profile

BPCE continues to maintain a strong capital position. Its Common Equity Tier 1 (CET1) ratio stood at 15.5% as of end-June 2026, comfortably above the European Central Bank (ECB) minimum regulatory requirement of 10.58%. The Group’s capital position successfully absorbed the 121-basis point impact from the full integration of novobanco, while benefiting from 24 basis points of organic capital generation during 2Q26. As a result, BPCE maintained a substantial 492-basis point capital buffer above regulatory requirements and a €16.1 billion buffer above its Maximum Distributable Amount (MDA) threshold, demonstrating strong capital resilience and loss-absorption capacity.

BPCE’s funding and liquidity profile remained robust, supported by a well-diversified funding base. The Group benefits from a strong domestic deposit franchise and established access to wholesale funding markets through various issuance channels, including covered bonds, senior preferred and senior non-preferred bonds, and Tier 2 capital instruments. Liquidity remained ample, with €332 billion of liquidity reserves and a quarterly average Liquidity Coverage Ratio (LCR) of 141%. The Group’s solid financial profile is further supported by stable long-term credit ratings of A+ (Stable) from Standard & Poor’s, Fitch Ratings and R&I, and A2 (Stable) from Moody’s, reinforcing investor confidence and funding flexibility.

Recommendations

Overall, BPCE maintains a strong and resilient credit profile, underpinned by broad-based earnings growth, a diversified business model, stable asset quality, strong capitalisation, ample liquidity and a well-diversified funding profile.

The Group’s solid financial position, supported by prudent risk management, significant capital buffers and stable investment-grade credit ratings, provides meaningful resilience against macroeconomic uncertainties

Within the AUD bond space, BPCE’s bonds stand out as among the highest-yielding investment-grade options. Following three RBA rate hikes in 2026 (February, March and May), which brought the cash rate to 4.35%, the RBA has not ruled out one further potential rate hike. Nevertheless, as rates appear to be approaching the terminal level, the current environment presents an attractive opportunity for investors to lock in relatively high yields in the range of 5.5% to 6.7%

Investors may also consider BPCE bonds issued in other currencies, including USD, SGD, GBP and EUR, which offer attractive yields ranging from approximately 2.9% to 5.2%.

Among the recommended bonds, we favour BPCEGP 6.5618% 12Jun2040 Corp (AUD), which currently offers an attractive yield of above 6%, in line with our preference for longer-duration bonds.

Investors should note that Tier 2 bonds carry loss-absorption risk, as these instruments may be subject to write-down or conversion in a non-viability scenario. When assessing Tier 2 bonds, investors should consider both yield and years to call, as bonds not redeemed after their call date are subject to regulatory capital amortisation under Basel III, which may incentivise issuers to redeem and refinance these instruments ahead of maturity.

Table 4: BPCE Bonds by Currency

Currency	Bond Name	Year to Call / Maturity	Yield to Call / Maturity	Min / Sub Investment amount	Credit Rating (Fitch)
AUD	BPCEGP 4.500% 26Apr2028 Corp (AUD)	-/1.7	-/5.5%	AUD 200K/10K	A
	BPCEGP 6.5618% 12Jun2040 Corp (AUD)*	8.8/13.8	6.7%/6.8%	AUD 1K/1K	BBB+
USD	BPCEGP 6.714% 19Oct2029 Corp (USD)	2.2/3.2	4.8%/5.3%	USD 250K/1K	A
SGD	BPCEGP 5.000% 08Mar2034 Corp (SGD)*	2.5/7.5	2.9%/3.6%	SGD 250K/250K	BBB+
SGD	BPCEGP 4.600% 21Jan2035 Corp (SGD)*	3.4/8.4	3.1%/3.5%	SGD 250K/250K	BBB+
GBP	BPCEGP 5.250% 16Apr2029 Corp (GBP)*	-/2.6	-/5.4%	GBP 100K/100K	BBB+
EUR	BPCEGP 4.375% 13Jul2028 Corp (EUR)	-/1.9	-/3.3%	EUR 100K/100K	A
*Tier 2 Bond Source: Bondsupermart, iFAST Compilation. Data as of 25 August 2026