(AOF) – Berenberg raised its price target from 25.50 euros to 30 euros and confirmed its recommendation to Hold on Societe Generale.
Societe Generale shares have outperformed the banking sector by 11% in the past month (but have still underperformed by 15% since the start of 2022), thanks to growing optimism about the next day investors. However, given expectations growing, we believe it may prove difficult for the new strategic plan to positively surprise without a change in the bank’s strategic direction,” the broker explained.
Still, he points out, downside risks appear limited and valuation provides support, with stocks trading at a 28% discount to the sector.
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Key points
– Bank born in 1864, one of the leading European financial services groups;
– Net banking income of €28.1 billion generated by retail banking in France – Societe Generale and Boursorama brands, international retail banking, financial services, mobility financing and insurance, then personal banking major customers and investor solutions;
– Business model claiming the vanguard of positive transformations: a 100% digitized bank, open platforms and architectures, a winner in the race for European leadership;
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Capital characterized by the presence of employee shareholders (7.93% and 13.2% of voting rights), with a board of 18 directors chaired by Lorenzo Bini Smaghi, the general management being ensured by Frédéric Oudéa until May 23, 2023 then by Slawomir Krupa;
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Solid balance sheet with, at the end of March, a CET 1 ratio of 13.5%% and a liquidity coverage ratio of 171%, hence debt rated A.
Challenges
– Strategy being revised for the 3rd quarter:
– 3 priorities including the execution of ongoing projects: creation of the new SG retail bank in France, development of Boursorama, planned acquisition of LeasePlan by ALD, joint venture project with AllianceBernstein and deployment of the ESG strategy,
– Innovation strategy rooted in the group’s DNA, focused on the emergence of a data-driven bank via artificial intelligence:
– 200 M€ of annual value creation via data and AI,
– 8/10ths of servers in the cloud (2025 “second generation” cloud objectives, including 50% in private cloud and 25% in public cloud,
– new business models – Shine for individual customers, Forge for digital bonds, reezocar for vehicle rental, Treezor, payment platform and digital currencies, Arquant for cryptocurrencies, etc.;
– P&T BAX start-up accelerator;
– 2025 environmental strategy aiming to become the world leader in sustainable finance with 2 axes:
– “ESG by Design” project to integrate criteria into all business lines,
– commitment to sustainable transition: financing increased to €300m 20% reduction in overall exposure to oil & gas extraction vs 2019, complete phase-out of thermal coal by 2030-40;
– Strategic progress: launch of the new retail bank in France resulting from the merger of the Societe Generale networks, strong growth of Boursorama (4.7 million customers), global positions in mobility (purchase of LeasePlan by ALD and, in the shares, joint venture with Bernstein.
Challenges
– Net assets per share of €62.3, to be compared with the market price;
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Monitoring of activity indicators – cost/income ratio of 60.6% and cost of risk of 13 points at the end of March;
– After a 3.8% decline in revenues and a net profit up 5.7% at the end of March, 2023 target: cost/income ratio close to 66 to 68% and cost of risk below 30 points;
– 2022 dividend of €1.7 and action program of €44O million.
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