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Edition July 12, 2017 - Crédit Agricole S.A.
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  • Edition July 12, 2017

    France – Corporate debt ratios : should we be worried?

    The debt ratio of non-financial companies (NFCs), defined as the ratio of debt (Credits and debt securities) to value-added, has grown significantly since 2006 to reach a rec-ord high of close to 135% at the beginning of 2017. At first sight, this development seems worrying. Nevertheless, other measures, such as net debt ratio or the debt-to-equity ratio (ratios linked to corporate accounting) provide a more reassuring image.

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  • Contents:

    - A marked rise in debt ratios
    - The rise in debt should be qualified
    - Vigilance on the interest rates and large corporates

  • Extract:

    The high level of the debt ratio and its continuous increase are explained by the structural financing gap occurring each year and more recently by the very advantageous financing conditions. In the coming years, long-term rates should rise gradually and profits should keep recovering. The second point could limit the increase in the debt ratio. However, the first point is a greater cause for concerns. It would limit the propensity to scale issue new debt at a low cost but it would also increase the interest payments. However, it is mostly the dynamic of the indebtedness of the large companies that explains the progression of the global debt ratio and that can be worrying and suggests to be cautious. The ratio of indebtedness of large corporates has indeed been driven mostly by the issuance of debt securities witch were available mostly to large corporates. The debt ratio of these is very high and keeps growing whatever the type of ratio used.

  • France: Non financial corporates debt ratios

    The debt ratio of non-financial companies (NFCs) is defined as the ratio between their debt and their value-added (VA). It has been observed that this ratio has seen a steady, fairly marked rise since 2006. It stood at 134.2% of value-added in Q1 2017, compared with 94% at the start of 2006.

    France: Non financial corporates debt ratios
  • Associative topics : Economics | France


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