The loss of Societe Generale hides excellent operating results

A few months before his departure – the name of his successor will be known next autumn for an effective departure before May 2023 – Frédéric Oudéa, Chief Executive Officer of the Societe Generale group, can congratulate himself “Two years of intensive transformation and simplification of the business model”even if the many projects that have been started will take full effect from 2023. Like its competitor BNP Paribas, the group actually achieved significantly better-than-expected results in the second quarter.

The result is of course burdened by the pre-tax loss of 3.3 billion in connection with the forced sale of the Russian subsidiary Rosbank. Hence a balance sheet loss of 1.48 billion euros in the second quarter. But the main thing is elsewhere.

Share buyback confirmed

Excluding the special item Russia, the group achieved an adjusted net profit of 1.5 billion euros – better than in the second quarter of 2021 – and most importantly, it achieved full catering in all its activities. Overall, quarterly sales exceed 7 billion euros (+13%), costs are under control (+5%), allowing the cost/income ratio to improve to 61.8%, risk costs remain low (15 basis points at an average forecast through 2025 of 30 to 35 basis points) and operating income jumps 19% to €2.39 billion, more than half of financial analysts’ forecasts.

The bank confirmed its share buyback program in the amount of 915 million euros. Given the stock’s steep discount on the stock market – the price representing around 40% of net assets – the bank also intends to continue its share buyback policy, up to a maximum of 40% of the distribution to shareholders (capped at 50% of base net income).

Societe Generale: Surprising departure of Frédéric Oudéa

execution of all activities

In detail, all indicators are green. Retail banking in France reported a solid net profit of 539 million euros for the quarter, particularly as credit activity continued to be strong. Margins are improving, although the two increases in Livret A (February and August) during the year should have a negative impact of 150 million euros. Note the good performance of the online bank Boursorama, which has just reached 4 million customers (including 250,000 from ING France), a year ahead of its market plan. The profitability of the retail division in France reached 14.4%.

The international retail banking and specialized financial services (including car leasing) are doing very well with a profitability of 25% and a net result of almost 700 million. Finally, market activities and large customers achieved a net profit of 742 million and a profitability of 20%.

Goals 2025

Frédéric Oudéa therefore looks to the future with some optimism, despite a scenario of a sharp slowdown in growth and lower rates from the second half of 2023. “Now it’s about reaping all the fruits of the creation of our new business models,” recalls Frédéric Oudéa, which will be completed in the next nine months.

Recall that the group is working on the integration of the Dutch group LeasePlan, European leader in car leasing, an acquisition of 4.9 billion euros, which should be completed by the end of the year. The group is also aiming for the merger of its retail banking networks in France, which will become legally effective on January 1, with an IT migration of the Crédit du Nord banks to the system of Societe Generale effective by the end of the year in the first half of 2023. Finally, Boursorama complete the acquisition of ING France customers by the end of the year, half of which has already been completed.

The CEO therefore confirmed the group’s targets for 2025, i.e. 3% compound annual sales growth, a cost/income ratio of less than 62%, a return on tangible equity of 10% and a CET1 solvency of 12% (post Effects of the new Basel 4 prudential rules).

“We approach the next few months with confidence while aware of a more uncertain economic and financial environment, but we believe our second quarter momentum and outlook remain extremely solid.”concludes Frédéric Oudéa.

Societe Generale leaves Russia: invoice for 3.2 billion euros