(AOF) – The second French bank after BNP Paribas to publish its third quarter accounts, Société Générale revealed slightly better than expected profits thanks to its investment banking activities. The action of the La Défense bank increased by 0.81% to 21.79 euros following this publication, which was also marked by the disappointing results of its retail bank in France. For UBS, which is Buy on value, this is a “transitional quarter in a transitional year”. The results are described as “dull” by Jefferies.
Over the July-September period, Société Générale saw its group share of net income fall by 79.6% to 295 million euros while analysts expected an average of 168 million euros.
The accounts for the quarter were penalized by the depreciation of the goodwill of the African, Mediterranean basin and overseas activities as well as the Equipment Financing activities, for a total amount of around 340 million ‘euros. Société Générale has also recorded a provision for deferred tax assets of approximately 270 million euros.
At the same time, net banking income, synonymous with turnover for the sector, fell by 6.2% to 6.19 billion euros in the third quarter. It fell 9.2% like-for-like and was 2% lower than consensus.
“Profit before provision was higher than expected, with capital markets revenues significantly higher, offsetting the disappointment in the French retail banking sector,” explains UBS.
Retail banking in France, which also includes private banking and insurance, recorded a drop of 16.4% in its net banking income to 1.88 billion euros and a 65.3% drop in its net profit. , group share, at 110 million euros. The net interest margin excluding PEL/CEL fell by 27% “due in particular to the impact of net interest margin hedging operations, the increase in the rate of regulated savings accounts, the consequences of usury rate, and the end of the TLTRO (targeted longer-term refinancing operations of the ECB)”. The net interest margin is now expected to decline by more than 20% in 2023, but it should return to its 2022 level in 2024.
The financing and investment bank, for its part, recorded stable revenues at 2.3 billion euros, including 827 million euros, an increase of 2.1% for Financing and Consulting Activities. They recorded a record for a third quarter.
Market activities experienced a 2.4% decline in revenue to 1.314 billion euros. Equities activities posted a decrease of 1% to 800 million euros while Rates, Credit and Foreign Exchange activities recorded a decline of 4.6% to 514 million euros.
Other good news from this publication, the bank has revised its annual cost of risk objective, to less than 20 basis points of outstanding credit compared to a previous objective of less than 30 basis points.
In terms of financial strength, the core capital ratio (CET) stood at 13.3%, up 20 basis points over the quarter. The market was targeting only 12.9%.
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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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