(BFM Bourse) – The two banks published their quarterly results this Thursday. The La Défense bank delivered performances above expectations and reassured on the trajectory of its net interest income in retail banking in France. It's more mixed on the BNP Paribas side.
The results of European banks have been rather good so far. On Wednesday, Barclays, HSBC and UBS delivered strong accounts. What about Société Générale and BNP Paribas, which published this Thursday?
Ultimately, the red and black establishment passes the test with flying colors while the copy submitted by the bank on rue d'Antin is much more mixed.
As a result, Société Générale jumped on the Paris Stock Exchange, gaining 8.9% around 11:25 a.m., signing the biggest increase in the CAC 40 when BNP Paribas, on the other hand, lost 5.7% and showed the biggest drop in the hint.
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A step in the right direction from Société Générale
Societe Generale ticked a lot of good boxes during the quarter. Jefferies thus judges that the bank has made “the progress that we want to see”.
In the third quarter, Société Générale generated a net profit of 1.37 billion euros, multiplied by five over one year and higher than the consensus, housed at 1.2 billion euros, according to Royal Bank of Canada.
Societe Generale managed to produce a positive jaws effect with net banking income (equivalent to bank turnover) higher than expected, at 6.84 billion euros, or 5% above expectations, and lower costs (management fees) (-3% compared to consensus) at 4.33 billion euros.
In detail, all divisions (with the exception of long-term automobile financing) exceeded expectations.
Market activities notably generated net banking income of 1.58 billion euros, compared to 1.49 billion euros expected. The group was buoyed by the good momentum of the equity businesses, up 10.1%, “thanks in particular to a very good performance of derivative products in a favorable market context”, explains the bank. “This is the second best third quarter in history” for this activity, underlined Société Générale. The interest rate businesses (bonds, credit, foreign exchange) grew by 6.1%.
Retail banking is recovering
Perhaps the most crucial point remains that retail banking has, this time, responded. This activity is more closely monitored at Société Générale than at its peers, to the extent that Banque de la Défense is much more exposed to retail banking in France and therefore to its potential recovery than BNP Paribas and Crédit Agricole SA.
In the third quarter, retail banking in France generated a net profit of 267 million euros, multiplied by more than nine over one year and 25% higher than consensus.
Net interest income in France recovered, increasing by 19% over a quarter (and 43% over a year), to stand at 1.06 billion euros. Incidentally, Société Générale has confirmed that it wants to achieve net interest income in France of 3.8 billion euros in 2024.
On the solvency side, the CET 1 ratio, which relates equity to risk-weighted outstanding assets, stood at 13.2% compared to a consensus of 13.1%.
“The results in line with/above consensus, the stabilization of trends and the reiteration of the net interest income objective in retail banking in France are reassuring given the disappointing publications of recent quarters”, appreciates Royal Bank of Canada .
“We believe that the third 2024 marks a turning point in Societe Generale's investment case with the confirmation of a recovery in retail banking revenues in France, particularly net interest income in France (…) so this source of investment controversy should hopefully be in the rearview mirror,” concludes Jefferies.
Note that alongside these announcements, Société Générale announced changes within its management, notably the replacement of the financial director, Claire Dumas, by Leopoldo Alvear (current financial director of Banco Sabadell), as of January 7.
BNP delivers a mixed performance
On the BNP Paribas side, the publication is half-baked. “The third quarter results are mixed in terms of operational trends,” summarizes Royal Bank of Canada.
BNP Paribas posted a net profit of 2.87 billion euros in the third quarter, “only” in line with expectations of 2.86 billion euros.
Both net banking income and costs evolved in line with expectations. The pre-tax result, at 4.06 billion euros, however exceeded the consensus by 3% thanks to a cost of risk (the provisions set aside to deal with defaults on loans) 15% lower than the consensus.
However, several divisions and activities disappointed. This is the case for retail banking revenues in France, which were 2% lower than expected, according to Jefferies. Morgan Stanley also notes the “weakness” of activity in France where gross operating income reached 460 million euros, or 5% less than the consensus, according to the American bank. “Retail banking continues to disappoint,” notes Jefferies.
The corporate and investment bank (BFI) published a net profit of 1.652 billion euros, 2% lower than expected due to costs higher than expected.
“Frankly, we expected better, particularly with regard to the BFI where revenues, although up 9% year-on-year, are published after more solid results at other establishments, which had placed the bar higher. For example, revenues from “Equity and Prime” (equities and securities management businesses on the market, editor’s note) increased by 13% year-on-year while we expected a result above 20%. emphasizes Jefferies.
Specialized businesses, which include the long-term automobile financing business with Arval and consumer credit, also disappointed, with pre-tax profit 17% lower than consensus. In this division, Arval is penalized “by the normalization of the price of used vehicles”, explained BNP Paribas.
Last point: the CET 1 ratio turns out to be a bit lower than expected, coming in at 12.7% compared to 12.9% expected, underlines UBS which judges that this point risks attracting the attention of analysts.
Julien Marion – ©2024 BFM Bourse
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