French bank Societe Generale has announced its second quarter 2023 results.
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French bank Societe Generale reported a smaller-than-expected 22% drop in first-quarter net profit on Friday, as gains from equity derivative sales offset further weakness in its retail banking and fixed-income trading.
France’s third-largest listed lender, whose Chief Executive Slawomir Krupa is searching for an end to several years of weak performance and price cuts, said the group’s net profit in the primary three months of the yr was 680 million euros ($729.30 million).
That was down 22% from the previous yr, but still beat the €463 million average of 15 analyst estimates compiled by the corporate.
Sales fell by 0.4% to six.65 billion euros, above the typical analyst estimate of 6.46 billion euros.
As rates of interest within the euro zone remained higher for longer than expected, many European banks exceeded expectations for the primary quarter and a few raised their profit targets for the yr.
French banks, including SocGen, haven’t benefited as much from the rise in rates of interest attributable to the high cost of deposits within the country. Its stocks have underperformed, although analysts expect lenders to do higher as rates of interest fall.
SocGen’s investment banking division reported a 26.4% rise in profits to 690 million euros, beating forecasts, while revenue fell 5.1% to 2.62 billion euros within the quarter.
Sales of equity derivatives, an area where SocGen has historically been strong, performed well, the bank said, as did corporate finance services and its advisory business.
Hedging policy
That offset a 17% drop in revenue from fixed income and currency trading, lagging behind the typical of Wall Street firms and its French rival BNP Paribas. Deutsche Bank achieved a 7% increase in fixed income and foreign exchange trading revenues.
SocGen said it continued to suffer from a costly hedging policy that was intended to guard the bank from low rates of interest but backfired. It cost SocGen €300 million in the primary quarter, on top of €1.6 billion in 2023.
The bank not publishes figures for its French retail operations, that are more vital to its earnings than BNP Paribas, as a standalone entity.
SocGen said the transfer of demand deposits to a regulated fixed-rate savings account weighed on results.
According to a recent study by UBS, French deposits were the costliest in Europe when rates of interest were negative. But their costs rose just as quickly because the European average as rates of interest and inflation rose.
SocGen’s share price performance has lagged its peers over the past three years, with shares rising 9%, in comparison with an increase of 26% for BNP and 13.5% for Credit Agricole. The basket of STOXX Europe 600 banks increased by 55% in the course of the reporting period.
Krupa, who took over the corporate only a yr ago, disenchanted investors last September by pushing back a key profitability goal by a yr to 2026 amid flat sales.
He has promised to revive share prices by cutting costs and hitting targets, while selling non-core assets and investing in expanding his online bank BoursoBank and his expanded auto leasing-listed group Ayvens.
