PARIS (Agefi-Dow Jones) – Societe Generale posted its first quarterly net loss in two years on Wednesday due to its exit from Russia, but its results beat expectations thanks to solid growth across all lines of business.
The bank also unveiled new medium-term targets, saying it expects revenue growth of at least 3% a year and a return on tangible capital (ROTE) of 10% by 2025.
SocGen posted a net loss of 1.48 billion euros last quarter, compared with a profit of 1.44 billion euros a year earlier. This negative result includes a €3.3 billion pre-tax charge already announced when the group left Russia, which led to the sale of Rosbank and insurance subsidiaries Interros Capital last May.
Excluding exceptional items, underlying profit rose 12% in the second quarter to 1.51 billion euros and clearly beat analysts’ consensus of 1.08 billion euros, according to FactSet.
Net banking income (NBI), equivalent to turnover, rose 13% to 7.07 billion euros, while the consensus was 6.48 billion euros.
Overall, Societe Generale posted a net loss of 640 million euros for the first half, but the underlying result rose 16% and NBI rose 15% to 14.35 billion euros.
Retail banking in France posted an 8.5% rise in revenue last quarter, driven by higher fees and record private banking. Internationally, retail banking and financial services revenue grew 21% at constant volume and exchange rates, driven by record long-term car rental subsidiary ALD and overseas retail banking. The latter recorded organic growth of almost 13%. In corporate financial services, which includes ALD, revenue jumped 45%.
The group’s third pillar, corporate and investment banking, also had a good quarter, with revenues up 16% organically thanks to a 20% jump in market activity and a 9% jump in investment banking.
A safe mattress
Unlike BNP Paribas, Societe Generale has not significantly increased its reserves to cope with the economic slowdown expected in the coming months, and its cost of risk has fallen in recent months (15 bps). But the group has already spent a total of 3.41 billion euros on provisions for outstanding debts, partly inherited from the health care crisis, and has not taken on reserves allowed by the economic recovery. This amount, which has increased by 54 million euros since the beginning of the year, will allow it to compensate for any non-payments by its customers in the event of a deterioration in the economic situation.
After the loss recorded in Russia, SocGen’s CET1 capital ratio fell to 12.9% of weighted assets at the end of June, compared to 13.7% at the end of 2021. This indicator remains 3.6 points higher than the regulatory requirements.
By 2025, the bank aims to achieve a CET1 ratio of 12% by integrating the accounting impact of the Basel IV agreements on banking regulation. This goal is based on a dividend policy that provides for the distribution of 50% of basic net profit to shareholders, including share buybacks.
SG also aims to increase its below-inflation costs and cost of risk by around 30 basis points in 2025.
-Thomas Varela, Agefi-Dow Jones; +331 41 27 47 99; [email protected] edited by: VLV
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03 August 2022 00:36 ET (4:36 GMT)