SocGen’s Turnaround Plan on Track as It Ups Revenue Forecast
In a sign that Chief Executive Frederic Oudea’s turnaround strategy is starting to pay off, Societe Generale now expects revenue to grow in all its businesses this year, including in French retail banking, which had been a weakspot.
Under pressure to boost profitability, Oudea has been trying to revive the lender after losses from stock-linked derivatives wiped out equity trading in the first and second quarters of 2020, whilst a cumbersome retail banking structure hindered growth.
France’s third-largest listed lender, after BNP Paribas and Credit Agricole SA, said its cost of risk, which reflects provisions against bad loans, would be lower than expected in 2021 at 20 to 25 basis points, down from a previous forecast of 30 to 35 basis points.
SocGen also said its cost of risk fell 88.9% in the second quarter, mirroring that of rivals including Spain’s BBVA and BNP Paribas, which slashed provisions for unpaid loans as the global economy was gradually recovering from the worst of the COVID-19 crisis.
The lender posted second-quarter net income of 1.44 billion euros ($1.71 billion), compared with a loss of 1.26 billion euros a year earlier. Revenue rose 18.2% to 6.26 billion euros.
In France, where the government ended a third nationwide lockdown in mid-May, retail banking revenue rose 8.7%.
Revenue was up 24.5% in its corporate and investment banking businesses, which SocGen began revamping two months ago by shifting resources into dealmaking and reducing its trading arm’s exposure to market swings.
Equity trading revenue was five times higher than a year earlier, while fixed income and currency trading fell 33%.
Shares in SocGen have more than doubled since their drop to near 30-year lows in autumn last year when they closed at 10.90 euros on Sept. 25. Shares closed at 24.86 euros on Monday.
($1 = 0.8420 euros)
(Reporting by Matthieu Protard; Additional reporting by Rachel Armstrong in London; Editing by Christian Schmolllinger and Anil D’Silva)