PARIS (Agefi-Dow Jones) — Societe Generale on Wednesday posted its first quarterly net loss in two years as it pulled out of Russia, but its results beat expectations on solid growth across all business lines.
The bank also presented new medium-term targets, indicating that it expects revenue growth of at least 3% per annum on average and a return on equity (ROTE) of 10% by 2025.
SocGen posted a net loss of 1.48 billion euros last quarter against a profit of 1.44 billion euros a year earlier. This negative result includes a €3.3bn pre-tax write-off already announced when the group left Russia, which resulted in the sale of Rosbank and insurance subsidiaries to Interros Capital in May last year.
Excluding exceptional items, underlying profit rose 12% in the second quarter to €1.51bn and clearly beat analysts’ consensus of €1.08bn, according to FactSet.
Net banking income (NBI), equivalent to turnover, increased by 13% to 7.07 billion euros, while the consensus was at 6.48 billion euros.
Overall, Societe Generale posted a net loss of €640m for the first half of the year, but the underlying result was up 16% and NBI was up 15% to €14.35bn.
Retail banking in France posted 8.5% revenue growth last quarter, driven by high fees and record performance in private banking. Internationally, retail banking and financial services revenue rose 21% on a flat scale and exchange rate, driven by record performance by long-term car rental subsidiary ALD and overseas retail banking. The latter posted 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 posted a strong quarter, with revenue up 16% organically, driven by a 20% jump in market activity and 9% growth in investment banking and investment.
Unlike BNP Paribas, Societe Generale has not significantly increased its reserves to cope with the economic downturn expected in the coming months, and its cost of risk has declined in recent months (15 bps). But the group has already spent a total of 3.41 billion euros on healthy debt reserves, partly inherited from the health crisis, and has not taken on the reserves allowed by the reopening of the economy. This amount, an increase of 54 million euros since the beginning of the year, will allow him to pay off any non-payments of his clients in the event of a deterioration in the economic situation.
After a loss recorded in Russia, SocGen’s CET1 capital adequacy ratio fell to 12.9% of weighted assets at the end of June from 13.7% at the end of 2021. This indicator remains 3.6 points above the regulatory requirements.
By 2025, the bank aims to achieve a CET1 ratio of 12% by taking into account the impact of the Basel IV agreements on banking regulation. This target is based on a dividend policy of distributing 50% of underlying net income to shareholders, including share repurchases.
SG is also aiming to increase its spending below inflation, as well as reduce the 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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August 03, 2022 00:36 ET (04:36 GMT)