Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Société Générale cut the outlook for its French retail bank, even as a booming quarter for equities trading helped it beat second-quarter profit forecasts.
Chief executive Slawomir Krupa, who was appointed a year ago to get the French lender back on track after a series of restructurings, is hoping SocGen’s investment bank can help drive a turnaround.
In a strong quarter for investment banking across Wall Street, SocGen followed peer BNP Paribas in outperforming big US banks with a 24 per cent rise in equities trading revenues.
Cross-town rival Crédit Agricole — France’s second-biggest listed bank while SocGen is the third — also beat earnings forecasts on Thursday underpinned by its best ever investment bank performance for a second quarter.
SocGen’s French retail business continued to drag on performance, however, with muted overall revenues even as net interest income (NII) improved 11 per cent on a year ago. On Thursday, the bank said it expected French NII to reach €3.8bn in 2024, down from a previous €4.1bn goal.
Shares in SocGen fell almost 7 per cent in early trading on Thursday.
Like other French banks, SocGen was slow to profit from European Central Bank interest rate rises of recent years owing to caps in its home market on how quickly these could be passed on to consumers. The bank said it was now being held back in part by high rates it had to pay out on savings accounts, which are set by the government, while loan growth was still weak.
It also suffered in previous quarters from backfiring hedges on low interest rates, although the impact of these trades is tailing off.
Overall in the second quarter, the French bank posted revenues of €6.7bn, up 6.3 per cent from a year earlier and above the €6.5bn average expected in a Refinitiv LSEG poll of analysts. Net income rose 24 per cent to €1.1bn, also above forecasts.
“Performance and another downward revision in French retail NII are disappointing,” Anke Reingen, an analyst at RBC Capital Markets said.
Reingen also flagged an improved outlook on SocGen’s capital, however, an area Krupa has been at pains to work on. The bank said its core capital ratio would come in above 13 per cent for 2024.
Krupa, a veteran of SocGen who took over from previous chief executive Frédéric Oudéa last year after 15 years at the helm, got off to an uneven start with a bet on sober but realistic targets that were poorly received by the stock market last September.
He has sought to placate investors with a promise to rebuild SocGen’s capital strength as a priority. Krupa has been selling off non-core businesses as part of this, including a deal to offload its business in Benin signed this week, and has been trimming jobs.
SocGen’s share price remains flat this year, however, underperforming broader European bank indices in part owing to volatility over a French parliamentary election in June and July.