SocGen beats Q2 estimates on lower provisions for bad loans (updated)

Ayvens SA

03/08/2023 06:46

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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
    

  
 (Adds RBC note paragraph 7, comparison with Italian banks
paragraph 11; exceptional items in paragraph 14)
    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 low provisions for bad loans 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 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 will present a strategic plan. 
    It will be a key test for the company veteran, tasked with
reviving the bank's stock after years of lackluster performance
and a painful exit from Russia.
    "Cost control in Q2 was encouraging but is also a reflection
of weaker revenues," Royal Bank of Canada analysts said in a
note. 
    Dubbed a "year of transition" by Krupa's predecessor
Frederic Oudea, 2023 is also 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, as does the most popular savings
account, Livret A, whose rate is set by the government. 
    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. 
    
    ITALY'S BANKS FARE BETTER
    The French retail division's results contrasted with Italy's
banking sector, where the top two lenders - Intesa Sanpaolo
 ISP.MI  and UniCredit  CRDI.MI  - posted much stronger than
expected earnings, boosted by the stronger interest rates.
    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%. 
    The second quarter was also affected by negative exceptional
items of 240 million euros, which Credit Suisse said were tied
to "legacy legal disputes". 
    Retail banking outside France fared better, as did SocGen's
car leasing division ALD Automotive  ALDA.PA , whose sales
jumped by more than 17% thanks to the acquisition of rival
LeasePlan. 
    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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