SocGen’s Turnaround Plan on Track as It Ups Revenue Forecast

In a sign that Chief Executive Frederic Oudea’s turnaround strategy is starting to pay off, Societe Generale now expects revenue to grow in all its businesses this year, including in French retail banking, which had been a weakspot.

Under pressure to boost profitability, Oudea has been trying to revive the lender after losses from stock-linked derivatives wiped out equity trading in the first and second quarters of 2020, whilst a cumbersome retail banking structure hindered growth.

France’s third-largest listed lender, after BNP Paribas and Credit Agricole SA, said its cost of risk, which reflects provisions against bad loans, would be lower than expected in 2021 at 20 to 25 basis points, down from a previous forecast of 30 to 35 basis points.

SocGen also said its cost of risk fell 88.9% in the second quarter, mirroring that of rivals including Spain’s BBVA and BNP Paribas, which slashed provisions for unpaid loans as the global economy was gradually recovering from the worst of the COVID-19 crisis.

The lender posted second-quarter net income of 1.44 billion euros ($1.71 billion), compared with a loss of 1.26 billion euros a year earlier. Revenue rose 18.2% to 6.26 billion euros.

In France, where the government ended a third nationwide lockdown in mid-May, retail banking revenue rose 8.7%.

Revenue was up 24.5% in its corporate and investment banking businesses, which SocGen began revamping two months ago by shifting resources into dealmaking and reducing its trading arm’s exposure to market swings.

Equity trading revenue was five times higher than a year earlier, while fixed income and currency trading fell 33%.

Shares in SocGen have more than doubled since their drop to near 30-year lows in autumn last year when they closed at 10.90 euros on Sept. 25. Shares closed at 24.86 euros on Monday.

($1 = 0.8420 euros)

(Reporting by Matthieu Protard; Additional reporting by Rachel Armstrong in London; Editing by Christian Schmolllinger and Anil D’Silva)

France’s SocGen Seeks to Boost Investment Bank Returns

The lender is looking to boost profitability in the division and stabilise revenues, after its flagship equities business, long a strength, was hit hard in the COVID-19 pandemic last year when companies suspended or cancelled dividends.

SocGen said it would target a more sustained and profitable growth of its corporate and investment banking businesses with a rebalancing between market activities, its more profitable but riskiest franchise, and financing and M&A advisory.

The French bank said it targeted a return on normative equity of over 10% in its global banking and investors solutions businesses from 2023, up from 7% now.

The lender also said it targeted a cost base of between 5.5 to 5.7 billion euros ($1.22 billion) in 2023 its global banking and investors solutions businesses, from around 5.8 billion euros in 2020, as it presses on with previously announced savings.

SocGen’s chief executive Frederic Oudea has accelerated an overall revamp of businesses underway since 2018, in one of his last chances to shore up his legacy before his term expires in 2023.

The bank’s shares have risen 46% so far this year after falling near 30-year lows in 2020, boosted by a rebound in its markets business and expectations loan losses caused by the pandemic will be lower than previously forecast.

But SocGen’s market value is still less than half what it was when Oudea took over in 2008 in the wake of the huge losses on equity derivatives caused by rogue trader Jerome Kerviel.

($1 = 0.8226 euros)

(Reporting by Matthieu Protard and Sudip Kar-Gupta, Editing by Sarah White)

Rebound in Trading Boosts Earnings at France’s SocGen

France’s third-largest listed bank, which tumbled in 2020 to its first full-year loss for a decade as the COVID-19 pandemic rattled its businesses, posted a 814 million euros ($977.37 million) net profit in the quarter against a 326 million euros loss a year ago.

Earnings per share amounted to 0.79 euro, above a mean forecast for 0.23 euro according to Refinitiv data.

Under market pressure to boost profitability, SocGen chief executive Frederic Oudea has speeded up an overhaul of business since 2018 to reinforce the bank’s balance sheet by selling units in Eastern and Central European countries such as Poland, Serbia and Bulgaria.

SocGen also exited or cut back some corporate and investment banking (CIB) activities, such as commodities trading. The bank is due to unveil a review of its CIB on May 10.

SocGen benefited from a sector-wide boom in share trading, with first quarter revenues jumping to 851 million euros against just 9 million euros last year when the bank was hit by losses from complext derivative products, and had said it would exit some business lines.

“The equity businesses enjoyed their best quarter since 2015,” SocGen said in a statement.

Revenue was up by 2.63% in fixed income and currency trading, outperforming some European rivals such as BNP Paribas and Barclays but still lagging U.S. investment banks.

The positive tone was echoed at other European banks, with ING and UniCredit also reporting better-than-expected earnings on Thursday.

However, European lenders are still grappling with thin margins and home markets still dealing with COVID-19 restrictions, with the resilience of their recovery likely to be tested if financial market volumes become more subdued.

In its French retail business, SocGen posted a 1.8% drop in revenue but said activity was gradually improving.

“The strong recovery in equities and the resilient top line performance in French retail is reassuring and consensus has to upgrade estimates given the turnaround in global markets and lower cost of risk guidance”, analysts at JPMorgan noted.

SocGen also confirmed pandemic-related provisions would fall this year from 2020 levels. The bank now sees its cost of risk, which reflects provisions against bad loans, to be between 30 and 35 basis points in 2021 against 64 basis points last year.

Shares in SocGen have gained 38.5% since the beginning of the year after a 45% slump in 2020. Its share price has more than doubled since its lowest at 10.77 euros on Sept. 30.

As part of further initiatives to enhance returns, SocGen entered last month in exclusive talks to sell most of its asset management arm Lyxor to Amundi for 825 million euros.

The lender said last year it would merge its two retail banking networks in France, with the closure of 600 of its nearly 2,100 branches by 2025.

(Reporting by Matthieu Protard and Marc Angrand, Editing by Sarah White and Carmel Crimmins)