The headquarters of Société Générale
Societe Generale reported a 21.7% fall in quarterly net profit on Friday, while beating expectations, as the group’s equity derivatives business offset weakness in retail banking and bond trading. .
The third French bank by market capitalization, which CEO Slawomir Krupa was tasked with turning around after years of disappointing performance, saw its group share of net profit fall to 680 million euros from 868 million a year earlier.
According to a consensus provided by SocGen, analysts on average expected a result of 463 million euros.
Net banking income stood at 6.65 billion euros, down 0.4% but above analysts’ expectations, who were counting on 6.46 billion euros.
On the Paris Stock Exchange, Société Générale shares climbed 4.73% to 27.01 euros at 10:54 a.m., among the strongest increases in the CAC 40 (+0.54%) and the pan-European Stoxx 600 index (+ 0.34%).
“The BFI (financing and investment bank) was the driving force behind the positive surprise in terms of revenues,” underline Jefferies analysts in a note, who also note the sharp increase in provisions in France, which Société Générale has attributed to the failure of several place files.
“We think this will be a topic that will spark questions from investors.”
For their part, RBC analysts note that “all of the group’s objectives for 2024 have been reiterated and the solid performance in the first quarter in ‘Global markets’ should help achieve them”.
The large customer bank and investor solutions recorded a 26.4% increase in its net profit in the first quarter, to 690 million euros, driven by the rise in stock market indices as well as strong demand for derivative products, a area in which SocGen has generally performed well.
DIFFICULTIES ON RATES AND EXCHANGE
The group’s financing and advisory activities also contributed to the result, offsetting the 17% fall over one year in interest rate and foreign exchange businesses, a much sharper decline than the average of rival American banks and that of BNP Paribas, its main competitor in France.
Societe Generale, whose financial health is largely dependent on the results of its retail banking activity in France, and which no longer publishes figures for its activity in the country separately, has notably emphasized that short-term hedging and the transfer of Part of demand deposits towards financial savings and interest-bearing deposits weighed on the first quarter.
On the stock market, Société Générale shares have only increased by 9% over the last three years, compared to an increase of 26% for BNP Paribas and 13.5% for Crédit Agricole. The Stoxx 600 bank index rose 55% over the period.
Slawomir Krupa, who took office last year, has the mission of recovering the stock price but the presentation of a new strategic plan for 2026 last September was sanctioned by investors.
“We are reasonably satisfied and very calm” about the progression of the stock price, Slawomir Krupa said on Friday at a press conference, referring to a “long-term process of improvement in a volatile market”.
TRADING INCIDENT
To improve the profitability of the red and black bank, Slawomir Krupa is committed to reducing costs while selling assets deemed non-strategic. He also wants to invest in the development of the online bank BoursoBank and in the listed car rental subsidiary Ayvens.
Formerly head of Societe Generale’s investment bank, Slawomir Krupa has already worked to reduce costs in the division and tackled trading risks.
On Friday, the leader returned to a trading “incident” which led to the departure of two traders based in Hong Kong, accused of having made unauthorized bets on the markets.
This incident took place late last year but came to light this week.
“The incident had no impact, neither on the group nor on the group’s customers. It was normally detected by the control system, which shows its effectiveness,” said Slawomir Krupa, adding that the measures “ appropriate” were taken, without detailing which ones.
(Written by Augustin Turpin with Mathieu Rosemain, edited by Blandine Hénault and Kate Entringer)
