(AOF) – Investors warmly welcome the presentation of Société Générale’s strategic plan for 2026, whose shares fall 6.52% to 24.745 euros. Managing Director Slawomir Krupa wants to make Société Générale a “leading, robust and sustainable European” bank. The strategy is based on a simplification of the business portfolio, better capital allocation and improved operational efficiency.
Slawomir Krupa targets a return on tangible equity (ROTE) of between 9% and 10% in 2026 compared to 8.9% last year.
To improve its profitability, Société Générale mainly aims to improve its efficiency. The group expects an operating coefficient of less than 60% in 2026 with a gradual improvement from 2024. It stood at 66.3% in 2022. 1.7 billion in cost reductions are anticipated over the duration of the plan.
No information has been communicated on the sale of assets deemed non-strategic.
Annual revenue growth is expected between 0% and 2% on average over 2022-2026.
The cost of risk is anticipated to be between 25 and 30 basis points in relation to outstanding loans.
Jefferies says it is disappointed by the increase in the lack of revenue growth, the increase in the hard capital ratio objective, but also by the absence of details.
The company targets organic growth in the group’s risk-weighted assets (RWA) limited to less than 1% per year on average between 2024 and 2026, with a stricter capital allocation, Boursorama and ALD being the only beneficiaries of additional organic capital.
Boursorama is targeting at least 8 million customers in 2026 and a profit of at least 300 million euros by this time. Boursorama is, however, expected to record net losses from 2023 to 2025.
For the banking group, the objective is to bring capital to a target level of core capital ratio (CET 1) of 13% in 2026 under Basel IV. It expects at least a cushion of 200 basis points above regulatory requirements. This ratio stood at 13.1% at the end of the first half of 2023.
The group plans a distribution policy based on a distribution rate of between 40% and 50% of published net income from 2023, with a distribution distributed in a balanced manner from 2024 between the payment of a cash dividend and the repurchase of shares. A distribution of excess capital will be considered once the CET 1 objective is achieved.
As part of strengthening its ESG actions, Société Générale will reduce its exposure to the oil and gas production sector by 80% by 2030 compared to 2019. The bank will also launch an investment fund for transition of 1 billion euros.
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Key points
– Bank founded in 1864, one of the leading European financial services groups;
– Net banking income of €28.1 billion achieved by retail banking in France – Société Générale and Boursorama brands, international retail banking, financial services, mobility financing and insurance, then retail banking. large clientele and investor solutions;
– Business model claiming to be at the forefront of positive transformations: a 100% digitalized 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, 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%, resulting in debt rated A.
Challenges
– Strategy currently being revised for the 3rd quarter:
– 3 priorities including the execution of current projects: creation of the new SG retail bank in France, development of Boursorama, proposed acquisition of LeasePlan by ALD, joint venture project with AllianceBernstein and deployment of the ESG strategy,
– Innovation strategy anchored in the group’s DNA, focused on the emergence of a data bank driven by artificial intelligence:
– €200 million in 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 world leader in sustainable finance with 2 axes:
– “ESG by Design” project for the integration of criteria in all professions,
– commitment to the sustainable transition: funding increased to €300 million, 20% reduction in overall exposure to oil & gas extraction vs. 2019, complete exit from thermal coal by 2030-40;
– Strategic progress: launch of the new retail bank in France resulting from the merger of the Société Générale networks, strong growth of Boursorama (4.7 million customers), global positions in mobility (LeasePlan purchase by ALD and, in the professions shares, joint venture with Bernstein.
Challenges
– Net assets per share of €62.3, to be compared to the stock market price;
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Monitoring of activity indicators – operating coefficient of 60.6%, and cost of risk of 13 points at the end of March;
– After a 3.8% decline in revenues and net income up 5.7% at the end of March, 2023 objective: operating ratio close to 66 to 68% and cost of risk below 30 points;
– 2022 dividend of €1.7 and share program of €44O million.
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