By Mathieu Rosemain
PARIS – French bank Societe Generale reported stronger-than-expected first-quarter earnings on Wednesday, propelled by a continued rebound in retail banking and a jump in equities trading amid volatile financial markets.
First-quarter group net income more than doubled from a year earlier to 1.61 billion euros ($1.84 billion), France’s third-biggest listed lender said, exceeding the average estimate of 14 analysts compiled by the company by about 400 million euros. One-off gains from asset sales accounted for half that sum.
Revenues were up by 6.6% to 7.1 billion euros, also beating the 6.9 billion-euro average estimate. The bank said its return on tangible equity — a key measure of profitability that at SocGen has long lagged rivals — was 11% in the first quarter, ahead of its full-year target of 8%.
The results come as Chief Executive Slawomir Krupa pushes ahead with a turnaround and cost-cutting plan that, after initially failing to restore investor confidence following years of lacklustre performance, appears now to be bearing fruit.
Analysts welcomed SocGen’s earnings performance in early notes to clients.
Keefe, Bruyette & Woods said the results looked “pretty good,” adding that it expected shares “to do well this morning.”
“Q1 25 ticks the right boxes, in our view, with an earnings beat driven by all units with French retail a standout on costs,” Jefferies said.
SocGen’s stock is up 73% over the last twelve months, overperforming BNP Paribas (+11.6%)and a 30% gain for the European banking sector.
Like other banks reporting this week, Krupa said SocGen was sticking with its targets for this year, including sales growth of more than 3%.
European lenders have so far shrugged off any major concerns about the economic fallout from U.S. President Donald Trump’s trade war and most listed banks have recovered nearly all of the big drop in their share prices in early April.
RETAIL RECOVERS
SocGen’s French retail division saw its quarterly net interest income — the difference between what banks earn on loans and what they pay on deposits — jump by 28% year-on-year, driven by a more than doubling of mortgage loan issuance.
The French government’s decision to cut interest rates on widely-used regulated savings accounts has lowered lenders’ payouts in February, and is set to continue to offer some relief to the industry in the months to come.
The Paris-based lender’s equities business increased sales by 22%, similar to the gains recorded by Wall Street banks but about half the increase at BNP Paribas.
Sales from trading in fixed income and currencies, however, dropped 2.4%, SocGen said.
Overall, the group’s investment banking division, its biggest, grew by 10% in the first quarter, beating expectations.
The bank’s cost-to-income ratio — a key measure of efficiency — came in at 65%, ahead of the full-year target of below 66%. It is still far above European average levels, according to data from the European Banking Authority.
Investors still value SocGen at relatively low levels. The bank’s price-to-book ratio has risen to trade near 0.5, up from less than 0.3 in September, but still lagging French peers and other major European lenders.
($1 = 0.8761 euros)
(Reporting by Mathieu Rosemain; Additional reporting by Bertrand de Meyer and Sinead Cruise; Editing by Tommy Reggiori Wilkes, Ingrid Melander)
