SocGen beats Q2 estimates on cost control, car leasing unit

Ayvens SA

03/08/2023 05:28

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      Q2 French retail banking earnings nearly halved
    

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      Q2 car leasing unit's sales up 17%
    

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      CEO Krupa to unveil new strategy on Sept. 18
    

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      Launches its 440 mln-euro shares buyback programme
    

  
    By Mathieu Rosemain
       PARIS, Aug 3 (Reuters) - Societe Generale  SOGN.PA ,
France's third-biggest listed bank, reported
better-than-expected quarterly earnings on Thursday, as cost
management and a strong growth of its car leasing division
alleviated a steep fall in margins at its retail branch. 
    SocGen reported a 900 million-euro ($984 million) group net
income for the three months-period ending in June, above the
average analyst estimate compiled by the company of 670 million
euros. 
    The beat was also underpinned by lower-than-expected "cost
of risk" -- money set aside for failing loans -- of 166 million
euros in the second quarter, while the markets expected more
than twice that figure, or 430 million euros.
    "The cost of risk was very low, reflecting the quality of
our origination and our loan portfolio," said Chief Executive
Slawomir Krupa, who was unveiling his first quarterly results in
his new role. 
    The bank, which confirmed its full-year objectives, didn't
mention longer-term targets, as all eyes are now set on Sept.
18, when Krupa and his new executive team will present a
strategic plan. 
    It will be a key test for the company veteran, tasked to
revive the bank's stock after years of lackluster performance
and a painful exit from Russia that made the French lender
appear vulnerable in the latest banking turmoil. 
    Dubbed a "year of transition" by Krupa's predecessor
Frederic Oudea, 2023 is notably marked by a severe downturn at
SocGen's French retail banking division, fresh off a merger of
its two local networks. 
    The division reported a 14% fall in revenues in the second
quarter, contributing to worse-than-expected group sales of 6.29
billion euros, down 8.9% from a year earlier. 
    France's stringent mortgage rules, marked by caps on lending
rates, weigh on banks' margins. Rates on the most popular
savings account, Livret A, are set by the government, further
biting the lenders' profitability. 
    The phasing out of a cheap long-term loan programme by the
European Central Bank also adds an extra burden. SocGen's
second-quarter net income almost halved from a year earlier, it
said. 
    The retail branch's woes came on top of a slowdown of its
investment bank unit in the quarter, as its profitable trading
business was affected by a less volatile environment. 
    Revenue from trading in fixed income and currency sinked by
18.4% in the second-quarter, while its equivalent for equities
retreated by 5.8%. 
    Retail banking outside France fared better, as did SocGen's
expanded car leasing division ALD Automotive  ALDA.PA , whose
sales jumped by more than 17% thanks to the acquisition of rival
LeasePlan, which makes the listed group the biggest in the field
in Europe. 
    SocGen said it was launching the 440 million-euro share
buyback programme announced earlier this year. 
($1 = 0.9145 euros)

 (Reporting by Mathieu Rosemain;
Additional reporting by Augustin Turpin;
Editing by Ingrid Melander)
 ((Mathieu.Rosemain@thomsonreuters.com; +33 1 8098 1239; Reuters
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