Societe Generale, France’s third biggest bank, favoured financial prudence over quick returns to shareholders as it prepared for the arrival of a new chief executive in May tasked with reviving its valuation in an uncertain economic climate.
SocGen said it had hiked provisions for bad loans fivefold in the fourth quarter, cutting its net income over the period by 35 per cent from a year earlier.
It also increased its core capital metric at end of December, calling 2023 a “transition year”, with the aim of finalising key deals after a bruising 12 months marked by a costly exit from Russia.
SocGen reported higher-than-expected quarterly income, driven by bumper trading sales, corporate financing and car leasing activities.
The bank is seeking to revive its stock valuation after years of restructurings and lackluster performance marked last year by its Russia exit, where it had to take a €3bn (£2.7bn) write-off for the sale of its Rosbank unit after the invasion of Ukraine.
“The only negative is on distribution (to shareholders), slightly below expectations,” Jefferies said in a note to clients before market open, as SocGen said it planned a €440m share buyback in 2023 on top of a dividend of €1.7 per share.
Shares were down by more than one per cent in early Paris trading.
Group revenues were up by four per cent to €6.89bn euros in the fourth quarter, also beating the Visible Alpha consensus.
Like its bigger French rival BNP Paribas, SocGen is enjoying higher revenues from debt and trading in volatile markets. Quarterly sales in this business jumped 56 per cent.
Incoming CEO Slawomir Krupa, who will replace Frederic Oudea in May, will oversee the merger of networks between SocGen’s two domestic retail brands in France, where it is struggling to benefit as much as some other continental peers from rising interest rates.
Krupa was instrumental in ironing out a plan to form a joint venture with AllianceBernstein on global cash equities and equity research in a bid to keep up with BNP and leading Wall Street banks Goldman Sachs and JP Morgan.
The French bank reaffirmed its 2025 financial targets, which include a cost to income ratio below 62 per cent and an expected return on tangible equity of 10 per cent.
Reuters – Mathieu Rosemain and Matthieu Protard