French banks, led by BPCE, most exposed to Middle East, Morningstar DBRS says
10/04/2026 09:40
By Mathieu Rosemain PARIS, April 10 (Reuters) - Groupe BPCE, France's third-biggest bank by assets after BNP Paribas BNPP.PA and Credit Agricole SA CAGR.PA, has the largest exposure among European banks to Middle Eastern government counterparties relative to its capital base, ratings agency Morningstar DBRS said in a report. BPCE said in an emailed statement to Reuters that the figures in the report did not reflect its Middle East exposure. "We have a small exposure, primarily in Saudi Arabia.” It would not elaborate. The report published on Thursday draws on European Banking Authority data, Morningstar DBRS said. It said EU and European Economic Area banks' total direct financial exposure to the Middle East amounted to around 132 billion euros ($154 billion) at end-2025, equivalent to just 0.5% of total sector assets. Morningstar DBRS described this level as posing limited direct risk. French banks as a group account for the largest share of exposure in absolute terms among EU and EEA banks, with BPCE followed by Credit Agricole and BNP Paribas. BPCE's Middle East government exposure was roughly 16% of the bank's core equity capital at the end of June 2025; Italy's Intesa Sanpaolo was second at around 11%, the report said. Risks were mitigated as the exposures were driven largely by holdings of Middle Eastern government bonds, not direct lending; counterparties are predominantly highly-rated sovereigns, Morningstar DBRS said. UAE, Qatar and Saudi Arabia account for the bulk of geographic exposure across EU/EEA banks, it added. The bigger risk to European banks is indirect: the Iran war has pushed G20 inflation projections to around 4% for 2026, up from a prior forecast of 2.8%, according to the OECD's March 2026 interim outlook, squeezing corporate borrowers already under pressure from U.S. tariffs, it said. HSBC and Standard Chartered were among major European banks most exposed to the conflict in the Middle East, potentially pressuring earnings, JPMorgan said in a note last month. ($1 = 0.8565 euros) (Reporting by Mathieu Rosemain; Editing by Emelia Sithole-Matarise) ((mathieu.rosemain@tr.com))