Societe Generale: stable quarterly result – 05.05.2022 at 09:17

(AOF) – In the first quarter of 2022, Societe Generale’s net banking profit grew by 16.6%, thanks to very good dynamics of all types of business. Thanks to a very positive effect, core operating income rose sharply by 38% to € 2.956 billion, and the ratio of core costs to revenue, excluding the Single Settlement Fund, increased by almost 7 percentage points to 56.4%. Net income, the group’s share increased by 3.4% to 842 million euros.

The cost of risk was 39 basis points compared to the first quarter of 2021 (21 basis points), mainly due to the effects of the crisis in Ukraine on Russian risk, ie 561 million euros (against 276 million euros in the first quarter of 2021) and broken down into doubtful reserves. arrears of € 313 million and an outstanding provision of € 248 million.

Excluding Russian activities sold, the value of the risk remains limited to 31 basis points and is divided into a provision for doubtful debts of EUR 277 million and a provision for outstanding debts of EUR 148 million.

During 2022, the cost of risk is expected to be between 30 and 35 basis points.

As at 31 March 2022, the Group’s Tier 1 capital ratio was 12.9%, approximately 370 basis points above regulatory requirements. The CET1 ratio as of March 31, 2022 includes the effect of +12 basis points for the phased impact of IFRS 9.

Excluding this effect, the full load factor is 12.8%. The level 1 ratio at the end of March 2022 was 15.1% (15.9% at the end of December 2021), and the overall solvency ratio was 17.9% (18.8% at the end of December 2021).

The Group seeks to achieve a CET ratio of 200-250 basis points above regulatory requirements, including after the entry into force of regulations completing the Basel III reform.

Frederic Udea, the group’s executive director, commented:

“This first quarter confirms the strength and sustainability of our business model through the stable operation of all our businesses in a more uncertain environment, improved operational leverage and limited cost of risk. The recycling project in the process of completing our activities in Russia, after a sudden change of views in this country, will allow the group to come out efficiently and orderly, ensuring continuity for its employees and customers.

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Key points

– Bank born in 1864, one of the leading European financial services groups;

– Net banking income of € 25.8 billion from retail banking in France – Societe Generale, Crédit du Nord and Boursorama, international retail banking, financial services and insurance, followed by wholesale banking clientele and investor solutions;

– Business model that claims to be at the forefront of positive transformations: 100% digital bank, open platforms and architectures, winner in the race for European leadership;

– Capital, characterized by the presence of employee shareholders (6.65% and 11.9% of voting rights), with 16 members of the board of directors, headed by Lorenzo Bini Smagi, Frederick Udea is the managing director;

– A solid balance sheet with € 65.1 billion in equity, a CET ratio of 13.7%, a liquidity coverage ratio of 129%, a leverage ratio of 4.9% and therefore a debt rating of A.

Problems

– Vision 2025 strategy, based on the merger with Crédit du Nord, local roots, responsiveness, adaptation to customer needs and responsibility:

– An innovative strategy based on the group’s DNA, focusing on the emergence of a database using artificial intelligence: € 200 million in annual value creation through data and AI / 8/10 servers in the cloud (second generation cloud 2025 target, including 50% in the private cloud and 25% in the public cloud / new business models -Shine for individual customers, Forge for digital commitments, reezocar for vehicle rental and treezor, payment platform and digital currencies;

– Environmental strategy aimed at becoming a world leader in sustainable financing with 2 axes: integration of criteria in all businesses: 100% responsible offer of savings, support to customers in their energy transition and structuring solutions around hydrogen… / commitment to sustainable transition: 10 Reduction of global risk of oil and gas production by 2025, full withdrawal from thermal coal by 2030-40 and by 2023 from loans guaranteed by reserves, ie +150 billion euros in assets for the transition to energy;

– Continuation of the integration of Crédit du Nord, completed in 2023;

– After refocusing activities, financial availability for reorientation towards mobility (acquisition of LeasePlan by its subsidiary ALD and discussion of Boursorama’s offer of alternative banking services to French ING clients).

Problems

– Net assets per share of 68.7 euros for comparison with the stock market price;

– The impact of the Russian-Ukrainian war: the alienation of Rosbank’s share, which led to a fall in the CET ratio to about 13.5% and the depreciation of net income by about 2 billion euros;

– goals by 2022 – a sharp increase in the cost / return ratio by 66-68% and reduce the cost of risk by 30 basis points;

– Dividends for 2021 in the amount of 1.65 euros and the share program, ie the total distribution rate of 50%.

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