Societe Generale Shares Rise on 1Q Results -- Update
May 03 2019 - 4:53AM
Dow Jones News
Adds earnings details, background, CEO comments, analyst
comments, share price
--SocGen first-quarter net profit fell 26% to 631 million
euros
--The bank's core Tier 1 ratio, a key measure of capital
strength, rose to 11.7% in March from 11.2% at the end of
December
--Fixed-income revenue fell 16% while equities revenue declined
5.3%
By Pietro Lombardi
Shares in Societe Generale SA (GLE.FR) gain ground after the
bank reported a significant improvement in capital despite a sharp
decline in net profit.
The results come as France's third-largest listed bank by assets
embarks on a restructuring plan unveiled after weak trading revenue
hit its investment bank business in the final quarter of last year,
forcing the bank to cut its 2020 profitability target and vow
further cost cuts.
The bank's core Tier 1 ratio, a key measure of capital strength,
rose to 11.7% in March from 11.2% at the end of December, the
lender said Friday.
SocGen shares traded 2% higher at 0739 GMT.
SocGen is already reaping the benefits of the restructuring,
Chief Executive Frederic Oudea said.
"We continued with the transformation of French Retail Banking,
provided further evidence of the robust momentum in International
Retail Banking & Financial Services and demonstrated Global
Banking & Investor Solutions' ability to rapidly adapt, with an
already tangible reduction in risk-weighted assets which, combined
with the finalization of five disposals, has resulted in a
substantial increase in the level of our capital," the CEO
said.
The bank's capital is well above expectations, Citi said, adding
that the results will boost market confidence in management's focus
and ability to deliver.
A string of disposals boosted the bank's capital. Along with the
results, SocGen said it signed an agreement to sell SKB Banka in
Slovenia to OTP Bank (BISI.RS), a deal that should have a positive
impact on capital.
SocGen has in recent months sold businesses in countries
including Serbia, Albania and Bulgaria.
"We are continuing to steadily implement our refocusing program,
with the announcement this morning of the disposal of our SKB
subsidiary in Slovenia. As a result of our determined actions, we
saw a substantial increase in CET1 ratio in Q1 19, strengthening
our ability to achieve the 12% CET1 ratio target as soon as
possible," Mr. Oudea said.
First-quarter net profit fell 26%, hurt by lower revenue and
growing costs.
Net profit for the period was 631 million euros ($705 million),
compared with EUR850 million a year earlier.
Net banking income, its top-line revenue figure, declined 1.6%
to EUR6.19 billion, while operating expenses grew 1.3% to EUR4.79
billion.
The global banking and investor-solutions business, which
includes investment banking and asset management, reported a 16%
decline on-year in net income. Revenue at its Global Markets &
Investor Services division fell 7.2% as a result of challenging
market conditions, it said. Fixed-income revenue fell 16% as "rate
activities were hit by low rate volatility in Europe and weak
client activity." Equities revenue declined 5.3%.
Last month, the bank unveiled a plan to cut nearly 1,600 jobs
globally after a slump in investment-banking revenue in the fourth
quarter. The move followed a cut to its 2020 profitability
target.
Net income declined 13% at the bank's French retail banking
business and grew 8.2% at the international retail banking &
financial services division.
Write to Pietro Lombardi at pietro.lombardi@dowjones.com
(END) Dow Jones Newswires
May 03, 2019 04:38 ET (08:38 GMT)
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