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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  Société Générale    GLE   FR0000130809

SOCIÉTÉ GÉNÉRALE

(GLE)
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Societe Generale : Shares Rise on 1Q Results -- Update

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05/03/2019 | 04:39am EDT

Adds earnings details, background, CEO comments, analyst comments, share price

--SocGen first-quarter net profit fell 26% to 631 million euros

--The bank's core Tier 1 ratio, a key measure of capital strength, rose to 11.7% in March from 11.2% at the end of December

--Fixed-income revenue fell 16% while equities revenue declined 5.3%

 
   By Pietro Lombardi 
 

Shares in Societe Generale SA (GLE.FR) gain ground after the bank reported a significant improvement in capital despite a sharp decline in net profit.

The results come as France's third-largest listed bank by assets embarks on a restructuring plan unveiled after weak trading revenue hit its investment bank business in the final quarter of last year, forcing the bank to cut its 2020 profitability target and vow further cost cuts.

The bank's core Tier 1 ratio, a key measure of capital strength, rose to 11.7% in March from 11.2% at the end of December, the lender said Friday.

SocGen shares traded 2% higher at 0739 GMT.

SocGen is already reaping the benefits of the restructuring, Chief Executive Frederic Oudea said.

"We continued with the transformation of French Retail Banking, provided further evidence of the robust momentum in International Retail Banking & Financial Services and demonstrated Global Banking & Investor Solutions' ability to rapidly adapt, with an already tangible reduction in risk-weighted assets which, combined with the finalization of five disposals, has resulted in a substantial increase in the level of our capital," the CEO said.

The bank's capital is well above expectations, Citi said, adding that the results will boost market confidence in management's focus and ability to deliver.

A string of disposals boosted the bank's capital. Along with the results, SocGen said it signed an agreement to sell SKB Banka in Slovenia to OTP Bank (BISI.RS), a deal that should have a positive impact on capital.

SocGen has in recent months sold businesses in countries including Serbia, Albania and Bulgaria.

"We are continuing to steadily implement our refocusing program, with the announcement this morning of the disposal of our SKB subsidiary in Slovenia. As a result of our determined actions, we saw a substantial increase in CET1 ratio in Q1 19, strengthening our ability to achieve the 12% CET1 ratio target as soon as possible," Mr. Oudea said.

First-quarter net profit fell 26%, hurt by lower revenue and growing costs.

Net profit for the period was 631 million euros ($705 million), compared with EUR850 million a year earlier.

Net banking income, its top-line revenue figure, declined 1.6% to EUR6.19 billion, while operating expenses grew 1.3% to EUR4.79 billion.

The global banking and investor-solutions business, which includes investment banking and asset management, reported a 16% decline on-year in net income. Revenue at its Global Markets & Investor Services division fell 7.2% as a result of challenging market conditions, it said. Fixed-income revenue fell 16% as "rate activities were hit by low rate volatility in Europe and weak client activity." Equities revenue declined 5.3%.

Last month, the bank unveiled a plan to cut nearly 1,600 jobs globally after a slump in investment-banking revenue in the fourth quarter. The move followed a cut to its 2020 profitability target.

Net income declined 13% at the bank's French retail banking business and grew 8.2% at the international retail banking & financial services division.

Write to Pietro Lombardi at pietro.lombardi@dowjones.com

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Financials (EUR)
Sales 2019 24 613 M
EBIT 2019 6 697 M
Net income 2019 3 055 M
Debt 2019 -
Yield 2019 9,50%
P/E ratio 2019 6,17x
P/E ratio 2020 5,34x
Capi. / Sales2019 0,77x
Capi. / Sales2020 0,76x
Capitalization 18 830 M
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Mean consensus HOLD
Number of Analysts 22
Average target price 28,67  €
Last Close Price 22,37  €
Spread / Highest target 65,4%
Spread / Average Target 28,1%
Spread / Lowest Target -23,8%
EPS Revisions
Managers
NameTitle
Frédéric Oudéa Chief Executive Officer & Director
Lorenzo Bini Smaghi Chairman
Philippe Amestoy Head-Operations & Transformation
William Kadouch-Chassaing Group Chief Financial Officer
Carlos Goncalves Head-Global Technology Services
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