Paris: Societe Generale SA, France’s second-largest bank, said second-quarter profit rose 8 per cent, boosted by lower provisions for bad loans and a gain on the sale of its stake in Visa Europe Ltd.
Net income rose to 1.46 billion euros ($1.6 billion) from 1.35 billion euros in the year-earlier period, the Paris-based bank said in a statement Wednesday. That beat the 1.36 billion-euro average estimate of six analysts compiled by Bloomberg. Societe Generale booked a 725 million-euro gain from the sale of its stake in Visa Europe, helping offset a 200 million-euro provision for legal risks.
Societe Generale has been able to avoid the investment-banking shake-up that rivals including Credit Suisse Group AG and Deutsche Bank AG have undergone, with Chief Executive Officer Frederic Oudea focusing on businesses such as prime services. With tougher regulation, record-low interest rates and volatile markets clouding growth prospects, the French bank has been cutting costs to reach profitability targets.
“Risks are still very high, the uncertainties are still very high,” Deputy CEO Severin Cabannes said in a Bloomberg Television interview. Still, Societe Generale is able to win market share in some businesses and saw “a regain in terms of investor appetite, especially from Asia, which is good news.”
Click here to watch Bloomberg’s interview with Deputy CEO Severin Cabannes.
Societe Generale rose 2.9 per cent to 29.34 euros at 9:29am in Paris. The shares have dropped about 31 per cent this year, while BNP Paribas SA lost 19 per cent.
Credit Agricole SA said on Wednesday that second-quarter profit jumped 26 per cent to 1.16 billion euros, beating analysts’ estimates, boosted by a gain tied to its stake sale in Visa Europe. BNP Paribas also reported better-than-expected earnings.
At Societe Generale, costs were little changed at 4.12 billion euros, while provisions set aside for loan losses contracted 8.3 per cent to 664 million euros. Gross operating income rose 4.4 per cent to 2.9 billion euros in the second quarter from a year ago.
Profit from French consumer banking fell 5.2 per cent to 403 million euros, hurt by “a very unfavourable rate environment” and shrinking revenue. Earnings from the international retail banking and financial-services division jumped 36 per cent to 436 million euros, with provisions for loan losses decreasing 33 per cent.
Investment Banking
Profit at global banking and investor solutions, which includes trading and private banking, fell 36 per cent to 448 million euros from an “exceptionally high” result in the year-earlier period. Revenue at the global-markets business, headed by Frank Drouet, fell 11.3 per cent to 1.54 billion euros, while income from trading fixed income, currencies and commodities rose 2.8 per cent. Equities-trading revenue slumped 29 per cent.
Societe Generale has announced hundreds of job cuts in France, including at its investment-banking support teams, and is also seeking a 20 per cent reduction in the number of its French branches through 2020. Last year, the bank disposed of its minority stake in asset manager Amundi SA to bolster capital buffers.
Societe Generale’s common equity Tier 1 ratio, an indicator of financial strength, was 11.1 per cent at the end of the second quarter, unchanged from the end of March. The European Banking Authority last week published stress tests for 51 European lenders, with Italy’s Banca Monte dei Paschi di Siena SpA coming out with the worst result.
The French lender posted a 12 million-euro loss in Russia, down from 43 million euros a year earlier. The bank maintained its forecast for a loss between 50 million euros and 100 million euros in the sanction-hit country this year.
Cabannes reiterated that Societe Generale may not reach its goal of a 10 per cent return on equity this year. While market and economic conditions currently are “completely different” from what the lender anticipated 2 1/2 years ago, it could reach its profitability target “in a normalised environment,” he said, without elaborating.
