((Automated translation by Reuters, please see disclaimer https://bit.ly/rtrsauto))
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SocGen announces a 60% drop in fourth quarter net profit
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SocGen reports a resumption of the NII in France
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Crédit Agricole indicates that weather-related losses are weighing on results
(Adds comments from the CEO of SocGen on the JV AllianceBernstein in paragraphs 15-16) by Mathieu Rosemain
French banks Crédit Agricole CAGR.PA and Société Générale SOGN.PA posted mixed results on Thursday, putting pressure on their shares, after BNPP BNPP.PA missed its forecasts last week.
French banks have not benefited as much as their euro zone rivals from the high interest rates of recent years, because they tend to pay more interest to depositors, reducing their net interest income ( NII).
Shares of Crédit Agricole, France’s second-largest bank, saw their biggest one-day fall since May last year, while those of SocGen, the country’s third-largest bank, were down by around 1% at 1130 GMT after falling as much as 5% earlier.
SocGen’s fourth-quarter net income fell sharply but beat analysts’ forecasts thanks to signs of recovery in its domestic retail business and stable trading revenue at the investment bank.
“The change in revenue trajectory for French retail banking is encouraging and it appears that SG is accelerating its restructuring,” Royal Bank of Canada analysts said in a note.
SocGen said its results capped a difficult year, marked by the costly acquisition of LeasePlan, a policy of hedging against low rates in retail banking that backfired when rates rose, and a strategic plan which was poorly received.
The group’s net profit in the final three months of 2023 fell almost 60% from a year earlier to €430 million ($463 million), beating the median average of €333 million. euros from estimates by 13 analysts compiled by SocGen.
Crédit Agricole’s fourth-quarter profit was slightly better than expected as its retail and corporate banking businesses offset lower revenues from its insurance division. However, net profit fell 25% from the previous year to €1.33 billion.
Net profit at the group’s French retail bank rose 4.2%, thanks to a rise in net interest income, while sales at its insurance business fell 47% due to a high loss ratio linked to weather conditions.
With an annual net profit of 6.35 billion euros, an annual return on tangible equity (ROTE) of 12.6% and a cost-to-income ratio of 54.1% last year, Crédit Agricole said having achieved in 2023 its financial objectives set for 2025.
‘REBOUND’ (REBOUND)
SocGen has struggled recently, with its shares lagging rivals and analysts questioning its low profitability and reliance on volatile investment banking revenue.
The bank’s forecast for 2024, which includes an annual sales growth target of at least 5%, fell short of expectations due to restructuring costs needed to achieve its savings plan.
In September, Chief Executive Slawomir Krupa unveiled a strategic plan that promised little revenue growth but pledged to cut costs and sell off non-performing assets.
The bank still has a way to go to achieve its goals. Its return on tangible equity (ROTE), a measure of profitability, was 1.7% at the end of 2023, while Mr Krupa’s target for 2026 was 9% to 10%.
On a call with analysts, Krupa declined to tell markets about potential divestitures SocGen could make, but confirmed the bank was on track to finalize its planned joint venture with US investment firm AllianceBernstein AXAFA.UL during the first half of 2024.
“There are a lot of synergies that could be achieved, mainly on the revenue side, but also some on costs,” Mr. Krupa told analysts in a call.
SocGen said the fourth quarter marked the “start of the rebound in net interest income,” the difference between what banks earn on loans and what they pay on deposits.
The bank is also spending to acquire customers for its BoursoBank online bank, increasing the number by 566,000 in the fourth quarter of 2023 to reach 5.9 million. ($1 = 0.9284 euros)