SocGen's quarterly sales miss estimates as French retail slumps (updated)

Ayvens SA

03/11/2023 07:24

* 
      Q3 sales down 6.2%
    

        * 
      French retail NII to fall by more than 20% in 2023
    

        * 
      Q3 net profit beats estimates
    

        * 
      Lowers 2023 cost of risk guidance
    

  
 (Recasts with revenue estimates miss; adds analyst comments in
paragraph 4,10)
    By Mathieu Rosemain
       PARIS, Nov 3 (Reuters) - Societe Generale  SOGN.PA ,
France's third-biggest listed bank, missed market expectations
on quarterly sales on Friday, as a slump of its French retail
added to earnings woes in spite of the resilient performance of
its investment bank division.  
    Group revenues dropped by 6.2% from a year earlier to about
6.2 billion euros, below a 6.3 billion-euro average of 13
analyst estimates compiled by the company.    
    Stringent French rules on mortgage rate-fixing, combined
with a government-fixed remuneration rate on the country's most
popular savings account have limited the benefits of higher
rates on French banks' net interest income (NII) -- earnings on
loans minus the cost of deposits.
    NII at the French retail division fell by 27% in the
quarter, excluding two regulated savings accounts, "well below
expectations," JP Morgan said in a note to clients.
        The French lender said it now saw NII of its French
retail, private banking and insurance division falling by more
than 20% in 2023. Next year, it expects the same key metric to
be higher or equal to the 2022 amount.
  
       The French retail division's quarterly earnings also
decreased because of hedging contracts to cover against the
risks of low interest rates. That negative effect peaked in the
third quarter, SocGen said. 
  
        Group net income came in at 295 million euros ($313.2
million), above the 168 million-euro analyst consensus. 
    It was down 80% from a year earlier, as the bank booked 340
million euros in write-downs tied to some of its activities on
top of a 270 million-euro provision for deferred tax assets. 
    Both hits to SocGen's bottom line had been flagged at the
bank's investor day in September. 
    Jefferies called SocGen's set of quarterly earnings "dull",
marked by a mixed bag of results. 
        
  
        MEAGER GROWTH
  
    SocGen's CEO Slawomir Krupa, who took the reins of the
company in May, is striving to revive the bank's shares by
delivering on the cost-cutting and conservative targets he set
out in September. 
    But his mid-term targets, which include a meager annual
revenue growth target of 0 to 2% by 2026, were deemed
disappointing by investors who expected higher returns to
shareholders, sending shares down by more than 10%. 
    The current year, dubbed a year of "transition" by SocGen,
is marked by the costly integration of car-leasing company
LeasePlan by the bank's listed rival ALD  ALDA.PA , under the
brand Ayvens. The bank has also finalised the merger of its two
French retail networks. 
    The two transactions have weighed on costs, at a time when
the French retail market, in stark contrast with other European
countries, yields lower margins even as interest rates have
risen at the fastest pace in recent history. 
    In this context, the 0.4% drop in sales seen at SocGen's
investment bank, compares well with some of its European peers.
    Revenue from trading in fixed income and securities was down
4.6%, outperforming bigger French rival BNP Paribas  BNPP.PA ,
Deutsche Bank  DBKGn.DE  and Barclays  BARC.L  as less volatile
financial markets dent investment banks' earnings.  
    The corporate financing and advisory business saw sales up
by 2.1%, helping propel the division's net profit, which was up
7.7% over the period. 
    SocGen cut the full-year target for its cost of risk --
money set aside for bad loans -- to "below 20 basis points",
down from a guidance of below 30 basis points.    
($1 = 0.9419 euros)

 (Reporting by Mathieu Rosemain, editing by Silvia Aloisi,
Ingrid Melander)
 ((Mathieu.Rosemain@thomsonreuters.com; +33 1 8098 1239; Reuters
Messaging: mathieu.rosemain.thomsonreuters.com@reuters.net;
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