SocGen earnings beat estimates as bond trading shines

Ayvens SA

12/05/2023 05:53

(Repeats without changes to text)

        * 
      First quarter group net income rose 5.7%
    

        * 
      Lowers full-year cost of risk target
    

        * 
      French retail division's sales sink 11%
    

  
    By Mathieu Rosemain and Matthieu Protard
       PARIS, May 12 (Reuters) - Societe Generale  SOGN.PA ,
France's third-biggest listed bank, posted better-than-expected
quarterly earnings on Friday as turmoil in bond and currency
markets boosted its trading business.
    The trading windfall cushioned a slump in SocGen's French
retail division, where earnings were curbed by stricter rules on
mortgage rate fixing.
    The results come less than two weeks before incoming CEO
Slawomir Krupa takes the helm.
    Group net income rose 5.7% from a year earlier to 868
million euros ($955.49 million) for the three months ending in
March, almost double the average of four analyst estimates
compiled by Refinitiv. 
    High volatility in interest rates and currencies fueled
client demand for hedging in the first quarter, boosting revenue
from trading in fixed income and currency by 16%, the bank said.
        Those gains surpassed competitors at 
    Deutsche Bank, Goldman Sachs and BNP Paribas, but fell short
of Credit Agricole.
        SocGen's listed car leasing company ALD  ALDA.PA  also
bolstered the results as it earned more from selling more
expensive used vehicles. The bank is set to close its 4.9
billion-euro acquisition of European rival LeasePlan later this
month.
  
    By contrast, sales at SocGen's French retail business
plummeted 11% in the first quarter. Group revenue was down 5.3%
to about 6.7 billion euros. 
        The unit's earnings have been curtailed by France's cap
on interest rates on new mortgages and consumer loans.
  
        The government also recently raised the savings rates
paid to 3% on the most popular savings accounts offered by
French banks, called Livret A, further curbing income from the
division. 
  
        The phasing out of a cheap long-term loan program by the
European Central Bank also weighed on the results. SocGen is
unlikely to reap the benefits of rising interest rates in its
French retail activity before 2024, the company said. 
    SocGen said it would set aside less money for soured loans
than it had initially planned this year. It now sees the
so-called "cost or risk" to be below 30 basis points this year,
down from a previous guidance of between 30 and 35 points. 
    The French bank maintained its 2025 financial targets, which
include a cost to income ratio below 62% and an expected return
on tangible equity of 10%.
($1 = 0.9084 euros)

 (Reporting by Mathieu Rosemain; Editing by Lananh Nguyen)
 ((Mathieu.Rosemain@thomsonreuters.com; +33 1 8098 1239; Reuters
Messaging: mathieu.rosemain.thomsonreuters.com@reuters.net;
Twitter: https://twitter.com/MathieuRosemain))