PARIS (Agefi-Dow Jones)–Despite the uncertainties linked to the war in Ukraine, Societe Generale started 2022 with a profit above expectations. The French bank published Thursday a net profit group share of 842 million euros for the first quarter, against 814 million euros a year earlier. Analysts on average had expected a quarterly net profit of 337 million euros, according to the Factset consensus.
The consequences of the conflict between Russia and Ukraine resulted in an increase in the cost of risk, which stood at 39 basis points, against 21 basis points a year earlier. Nearly 60% of the risk burden in the first quarter is linked to the group’s Russian exposures, said its financial director Claire Dumas. Last month, Societe Generale announced that it had ceased its banking and insurance activities in Russia, and had reached an agreement to sell its stake in the Russian bank Rosbank as well as its Russian insurance subsidiaries to Interros Capital. This investment fund owned by an oligarch was the previous shareholder of Rosbank.
Rosbank was subject to a net charge of 136 million euros. Excluding this impact, the cost of risk amounted to 31 basis points.
For the year 2022, Societe Generale has revised its cost of risk forecast upwards. The establishment estimates that it will be between 30 and 35 basis points – against 13 points in 2021 – whereas it previously expected a cost of risk of less than 30 basis points for the current year. The new projection takes into account the burden of Russian assets about to be sold but also the impact of the war on the bank’s offshore portfolio. Claire Dumas clarified that the group was continuing “its prudent provisioning policy” and had chosen not to carry out a reversal of provisions carried out during the Covid-19 pandemic.
Underlying net income rose 21.3% in the first quarter to 1.57 billion euros. “This first quarter confirms the solidity and resilience of our business model with a sustained performance of all of our businesses in a more uncertain environment, improved operating leverage and a contained cost of risk”, commented the director. general of the group, Frédéric Oudéa, quoted in a press release.
Net banking income (NBI), the equivalent of turnover, increased by 16.6% in the past quarter, to 7.2 billion euros, driven by all businesses. Analysts on average were forecasting NBI of 6.23 billion euros, according to the FactSet consensus.
The sale of Rosbank penalizes capital
La Banque de la Défense estimated that the sale of Rosbank should cost it nearly 3.1 billion euros. This loss will only be reflected in the accounts for the second quarter. On the other hand, the operation has already had an impact on the group’s capital and cost it in the first quarter 14 basis points on its regulatory CET1 ratio. The latter stood at 12.9% at the end of March 2022, compared to 13.5% at the end of March 2021. A residual impact of 4 basis points on the group’s CET1 will be recorded when the sale of Rosbank is finalized “within coming weeks,” said the chief financial officer.
Retail banking in France resisted. Its revenues excluding PEL/CEL stood at 2.16 billion euros, up 6.4% compared to the first quarter of 2021, thanks to the dynamic on interest margins and financial and service fees.
The retail banking and international financial services division saw its activity increase by 19.4% over the quarter, to 2.2 billion euros. The long-term leasing and vehicle fleet management business posted record net banking income, up 53%, thanks to good business performance and continued very strong demand for used cars. The group, which has signed the framework agreement for the proposed acquisition of LeasePlan by ALD, ultimately wants to make “sustainable mobility the third pillar” of its business model, recalled Claire Dumas.
Corporate and investment banking recorded a good performance, with revenues up 18.1% to 2.75 billion euros, which illustrates, according to Societe Generale, “the relevance of the strategy presented in May 2021”.
Market activities recorded a good performance in this first quarter at 1.78 million euros, up 20.5% compared to the first quarter of 2021, benefiting from strong momentum in fixed income products, credit and foreign exchange than on equity businesses.
Financing and consulting activities posted revenues of 790 million euros, up 24.4% over one year.
-Aurélie Abadie, L’Agefi. ed: ECH
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May 05, 2022 00:35 ET (04:35 GMT)