SocGen's Q4 earnings slide but retail bank helps it beat forecasts (updated)

Ayvens SA

08/02/2024 07:03

* 
      SocGen reports 60% drop in Q4 net income
    

        * 
      Says a recovery in net interest income has started in
France
    

        * 
      Sees sales grow by at least 5% in 2024
    

        * 
      Proposes 40% dividend payout ratio, 280 mln-euro share
buyback
    

  
 (Adds analyst comment in paragraph 6; details on French retail
activities in paragraph 12; BoursoBank in paragraph 15)
    By Mathieu Rosemain
       PARIS, Feb 8 (Reuters) - French bank Societe Generale
 SOGN.PA  reported a sharp drop in fourth-quarter net income on
Thursday, although the lender beat analyst expectations thanks
to signs of recovery in its domestic retail business and stable
investment bank trading revenue. 
    The results capped a challenging year of transition, SocGen
said in a statement, marked by the costly acquisition of
LeasePlan, a hedging policy against low rates at the retail unit
that backfired when rates jumped, and a badly-received strategic
plan.
    France's third-biggest listed bank said group net income in
the final three months of 2023 tumbled nearly 60% from a year
earlier to 430 million euros ($463 million), beating the 333
million-euro median average of 13 analyst estimates compiled by
the company. 
    Group revenue in the quarter dropped by almost 10% to about
6 billion euros, above the 5.86 billion-euro estimate of the
company-compiled consensus. 
    Sales from trading in SocGen's investment bank slipped by
0.8%, the bank said, as a strong showing for equities offset a
22% decline in fixed income and currencies.
    "The change in trajectory in French retail banking revenues
is encouraging and it appears that SG is moving faster on its
restructuring" Royal Bank of Canada analysts said in a note to
clients, adding however that there were "a lot of moving parts"
in SocGen's results.
    SocGen has struggled recently, with its shares lagging
rivals and analysts questioning its low profitability and
reliance on volatile investment bank earnings.
    Chief Executive Slawomir Krupa in September unveiled a
strategic plan that promised little in the way of revenue growth
but pledged to slash costs and sell non-performing assets. 
    The bank has some way to hit its targets: return on tangible
equity (ROTE), a measure of profitability, stood at 1.7% at
end-2023, against Krupa's target for 2026 of between 9% and 10%.
    In 2024, the French lender targets a yearly growth in sales
of at least 5% and a ROTE of more than 6%.    
    
    CLIENTS ACQUISITION
        French banks have not benefited as much as euro zone
peers from soaring rates because they tend to pay more interest
to depositors.
  
        But SocGen said the fourth quarter marked the "beginning
of the rebound in net interest income" (NII) -- the difference
between what banks make on loans and pay out on deposits.
  
        NII rose by 7% in the fourth quarter compared to the
third, in line with the bank's guidance.
  
    The NII generated by SocGen's French retail unit was still
down by 321 million euros in the fourth quarter compared to the
same period last year. In total, the NII of French retail
activities retreated by close to 1.1 billion euros in 2023. 
        SocGen is also spending money to acquire clients for its
online brand bank BoursoBank, increasing the number of clients
by a record of 566,000 in the fourth quarter of 2023 to reach a
total of 5.9 million.
  
    The bank announced a proposed dividend of 0.90 euro per
share, reflecting a payout ratio of 40%, the bottom end of its
range, and said it would buy back 280 million euros worth of
shares.
    This year would see "the meticulous execution of our
strategic plan", notably through "improved operational
efficiency", Krupa said on Thursday.
    SocGen's boss has promised to generate 1.7 billion euros
worth of cost savings. The bank earlier this week announced 900
job cuts in France.  
    SocGen's turnaround efforts are designed to revive the
group's share price, which is underperforming the European
banking sector. 
    SocGen's stock price is down by more than 19% over the last
twelve months compared with an increase of more than 5% of the
STOXX Europe 600 Banks index  .SK7P .    
($1 = 0.9284 euros)

 (Reporting by Mathieu Rosemain
Editing by Tommy Reggiori Wilkes, Ingrid Melander)
 ((Mathieu.Rosemain@thomsonreuters.com; +33 1 8098 1239; Reuters
Messaging: mathieu.rosemain.thomsonreuters.com@reuters.net;
Twitter: https://twitter.com/MathieuRosemain))