PARIS (Reuters) – Societe Generale reported on Thursday a sharp drop in its net profit in the fourth quarter, however exceeding analysts’ expectations thanks in particular to the recovery of its retail banking activity in France.
Over the last three months of the fiscal year, the French bank’s group share of net income fell by 59.8% year-on-year, to stand at 430 million euros, above 333 million euros. euros expected, according to a consensus compiled by the group.
The net banking income of the third French bank by market capitalization fell by 9.9% in the fourth quarter, standing at 5.96 billion euros, a figure higher than the 5.86 billion euros expected by the analysts.
Market activities fell by 0.8%, the bank indicated, the good performance of equity activities having offset the 22.1% drop in rates, credit and foreign exchange activities.
Revenues from the retail banking in France, private banking and insurance division fell by 14.3% but Société Générale emphasizes that this quarter was “nevertheless marked by the start of the rebound in the net interest margin”.
The net interest margin – the difference between the interest rate at which banks lend and that at which they refinance – increased by 7% in the fourth quarter compared to the previous quarter, in line with the group’s forecast.
“The change in trajectory of retail banking revenues in France is encouraging and it seems that Société Générale is accelerating its restructuring,” Royal Bank of Canada analysts point out in a note.
THE ROTE FAR FROM THE GOAL
On the Paris Stock Exchange, Société Générale shares fell 1.66% to 21.87 euros at 9:11 a.m., among the biggest falls in the CAC 40 (+0.15%).
“We expect Societe Generale’s profitability to improve in the coming years, driven by cost synergies and the recovery of the net interest margin in retail banking in France and a less contribution to the Single Resolution Fund,” JPMorgan analysts said in a note.
“However, ROTE remains insufficient in the context of the sector and cost reduction is essential to reverse the stock’s underperformance.”
The general director of Société Générale, Slawomir Krupa, unveiled in September a strategic plan aimed at turning around the bank, which has been lagging behind its rivals for several years.
Return on tangible net assets (ROTE) stood at 1.7% at the end of 2023, far from the objective defined in September by Slawomir Krupa, who plans to achieve a fund profitability ratio tangible assets from 9% to 10% in 2026.
For 2024, Société Générale expects revenue growth of at least 5% and an ROTE of more than 6%.
“We are approaching the year 2024 with confidence and determination, that of meticulous execution of the roadmap and an unfailing commitment to the achievement of our financial objectives which notably involves increased operational efficiency,” declared Slawomir Krupa in a press release.
The CEO of Société Générale announced in September that the group was targeting gross cost savings of around 1.7 billion euros by 2026.
The bank announced on Monday a reorganization project which will result in the elimination of 900 positions, or around 5% of the head office workforce in France.
Société Générale also announced on Thursday its intention to propose a dividend of 0.90 euros per share and to launch a share buyback program worth 280 million euros.
(Report Mathieu Rosemain, written by Augustin Turpin and Blandine Hénault, edited by Kate Entringer)
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