2023-11-03 14:49:00
The new CEO of Société Générale, Slawomir Krupa, had prepared the ground well when presenting his strategic plan last September: the good news will come later, probably in 2024.
The bank thus published a quarterly net result divided by five, to 295 million euros. An amount however slightly higher than the consensus of financial analysts published by the bank. It must be said that analysts drastically revised their forecasts in September following the capital market day of September in London, which disappointed expectations and caused the share price to fall by 12% in a few hours.
interest margin under pressure
Société Générale is undoubtedly one of the least valued of the large European banks, around 0.3 times its net assets. This is perhaps one of the attractions of value, its ability to rebound, while good news could take over from the bad. Once again, it was the retail activities in France which weighed down the bank’s accounts in the third quarter, due to a policy of covering the interest margin which was costly. But, the bank specifies in its press release, that the peak of the negative impact of short-term hedging on the net interest margin ” was reached “, which suggests an improvement in retail activity in 2024.
But, for the moment, retail banking revenues in France are down 16% compared to the same period of 2022 and 11% compared to the previous quarter. In total, the bank is counting on a drop of of the order of 20% of its interest margin in 2023. In 2024, the net interest margin should return to its 2022 level in 2024, or even be above it.
Low cost of risk
The bank also incurred 610 million euros in exceptional charges over the quarter, including 340 million for depreciation of assets (goodwill) on African subsidiaries in the process of being sold. These charges are not a surprise: they were announced last September.
On the more reassuring side, the low cost of risk is confirmed and it should be around 20 basis points (on outstanding loans) in 2023. Finally, the bank’s capital, of which it is one of the bank’s priorities, exceeds expectations with a CET 1 regulatory ratio (hard equity) of 13.2%. The other side of the coin is that profitability is affected, with a published ROTE (return on equity) of 3.8% (6% excluding exceptional items), which appears low compared to other European banks, including BNP Paribas. . The bank must now convince of its ability to bounce back in 2024, and this time, without any bumps or unpleasant surprises.
In detail, net banking income (NBI), equivalent to turnover for the sector, rose to 6.19 billion euros in the third quarter, down 6.2% over a year. The retail banking division in France, which also includes private banking and insurance, has particularly suffered. It shows a GNP down 16.4% to nearly 1.9 billion euros, and a net profit of 110 million euros (-65.3%).
Like its peers, Société Générale has been penalized by the rise in rates, the beneficial effect of which on French banks takes longer to materialize than in other countries. And for good reason, the vast majority of loans are at a fixed rate. On the other hand, they must immediately better remunerate all deposits, and in particular Livret A.
Higher costs
The bank has also chosen to protect itself against a drop in rates until mid-2022, a costly hedge. Indeed, this strategy turns out to be counterproductive to the direction of rates. However, it should decrease over the coming quarters, before disappearing during 2024.
The corporate and investment banking businesses, for their part, achieved a net profit of 647 million euros, up 7.7% year-on-year, while the activity’s NBI amounted to 2 .3 billion euros (-0.4%). As for the international retail banking division, which also includes mobility services such as car leasing, its net profit fell by 26.2% to 377 million euros, mainly due to an increase in costs, with activity having grown by 12% over one year.
The increase in costs is explained in particular by the integration of LeasePlan, whose acquisition for 4.8 billion euros was finalized in May and which gave birth to a European giant in long-term car rental now presented under the brand “ Ayvens ».
(With AFP)
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