Societe Generale’s losses masked excellent operating results

A few months before his departure – the name of his successor will be known next fall for the effective departure before May 2023 – Frédéric Oudéa, Chief Executive Officer of the Societe Generale group, can be congratulated on his own “two years of drastic change and simplification of the business model”although many projects launched are fully effective from 2023. Like his competitor BNP Paribas, the group actually posted, in the second quarter, results, better than expected.

True, the results were weighed down by the pre-tax accounting loss of 3.3 billion linked to the forced sale of its Russian subsidiary Rosbank. So the accounting loss of 1.48 billion euros in the second quarter. But the main thing is somewhere else.

Part purchase confirmed

Excluding the exceptional item in Russia, the group posted an underlying net profit of 1.5 billion euros – better than in the second quarter of 2021 – and above all it achieved a full board in all its activities. In general, the quarterly turnover exceeded 7 billion euros (+ 13%), the costs were controlled (+ 5%), which made it possible to improve the cost / income ratio to 61.8%, the cost of risk remains low (15 basis points in an average forecast in 2025 of 30 to 35 basis points) and operating income jumped 19% to 2.39 billion euros, more than half of the forecasts of financial analyst.

In the process, the bank confirmed its share buyback program worth 915 million euros. Due to the high discount of the stock in the stock market – the price represents approximately 40% of the net assets – the bank also intends to continue its share buyback policy, up to a maximum of 40% of the distribution distribution to shareholders (limited to 50% of the underlying net income).

Societe Generale: sudden departure of Frédéric Oudéa

Performance of all activities

In detail, all indicators are green. French retail banking posted a solid net profit of 539 million euros in the quarter, with particularly strong credit activity. Margins are improving, although the two increases in Livret A (February and August) should have a negative impact of 150 million euros on the year. Note the good performance of the online bank Boursorama which recently reached 4 million customers (including 250,000 from ING France), one year ahead of its market plan. The profit of the retail division in France reached 14.4%.

International retail banking and specialized financial services (including car rental) did very well, with a profit of 25% and a net result of almost 700 million. Finally, market activities and major customers generated a net income of 742 million and a profit of 20%.

2025 goals

So Frédéric Oudéa sees the future with a certain optimism, despite a scenario of a sharp slowdown in growth and lower rates from the second half of 2023. “It is now a question of reaping all the fruits of the creation of our new business models”, recalls Frédéric Oudéa, which will be completed in the next nine months.

Remember that the group is working on the merger with the Dutch group LeasePlan, the European leader in car rental, an acquisition of 4.9 billion euros that should be completed by the end of the year. The group also continues the integration of its retail banking networks in France, which will be effective from a legal point of view on January 1, with the IT migration of the Crédit du Nord banks to the Societe Generale system effective at the end of first half of 2023. Finally, Boursorama must finish acquiring ING France customers by the end of the year, half of which has already been completed.

The CEO therefore confirmed the group’s objectives for 2025, ie average annual revenue growth of 3%, a cost/income ratio below 62%, a profit of 10% on tangible equity and a solvency of CET1 at 12% (after the effect of the new. Basel 4 prudential rules).

“We approach the next few months with confidence, while being clear about an uncertain economic and financial situation, but we consider that our second quarter momentum and our outlook remain strong. very”concluded Frédéric Oudéa.

Societe Generale left Russia: a bill of 3.2 billion euros