SocGen’s third-quarter earnings beat estimates as the investment bank offset a slump in France
People walk past a logo of French bank Societe Generale in front of the company’s skyscraper in the La Defense financial and business district near Paris, France, September 14, 2023. REUTERS/Gonzalo Fuentes/File Photo Acquire License Rights
- Third quarter sales decline of 6.2%
- The investment banking unit’s Q3 profit rose 7.7%
- Reduces risk advisory costs in 2023
PARIS, Nov 3 (Reuters) – Société Générale (SOGN.PA), France’s third-largest listed bank, reported better-than-expected quarterly results on Friday, as a robust performance at its investment bank offset a sharp decline in its retail division.
SocGen’s reported third-quarter consolidated net profit was 295 million euros ($313.2 million), above the 168 million euro average of 13 analyst estimates compiled by the company.
That was an 80% decline compared to the previous year as the bank booked write-offs of €340 million related to some of its activities, in addition to a provision for deferred tax assets of €270 million.
Both impacts on SocGen’s bottom line were noted at the bank’s investor day in September. Group sales fell by 6.2 percent to around 6.2 billion euros compared to the previous year, which was below the average of 6.3 billion euros expected by analysts.
SocGen CEO Slawomir Krupa, who took charge of the company in May, is aiming to revive the bank’s shares by meeting cost-cutting and conservative targets he set in September.
But its medium-term targets, which include meager annual sales growth of 0% to 2% through 2026, were seen as disappointing by investors expecting higher returns for shareholders, leading to a share price decline of more than 10%.
The current year, which SocGen describes as a year of “transition”, will be marked by the integration of car leasing company LeasePlan by the bank’s listed rival, ALD (ALDA.PA), under the Ayvens brand. The bank has also completed the merger of its two French retail networks.
The two transactions have weighed on costs at a time when the French retail market is yielding lower margins, in stark contrast to other European countries, even as interest rates have risen at the fastest pace in recent history.
Strict French regulations setting mortgage rates, combined with a government-set interest rate on the country’s most popular savings account, have limited the benefits of higher interest rates on French banks’ net interest income (NII) – income from loans minus the cost of deposits.
The French retail division’s NII fell 27% in the quarter, excluding two regulated savings accounts.
In this context, the 0.4% decline in revenue at SocGen’s investment bank compares favorably with some of its European peers.
Fixed income and securities trading revenue fell 4.6%, outperforming larger French rivals BNP Paribas (BNPP.PA), Deutsche Bank (DBKGn.DE) and Barclays (BARC.L) as less volatile Financial markets weighed on the income of investment banks.
The corporate finance and advisory business saw revenue rise 2.1%, helping to boost the division’s net profit, which rose 7.7% in the period.
SocGen cut its full-year target for its cost of risk – money set aside for bad loans – to “below 20 basis points” from a forecast of under 30 basis points.
($1 = 0.9419 euros)
Reporting by Mathieu Rosemain, editing by Silvia Aloisi
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