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A lacklustre performance from its retail bank dragged on Société Générale’s revenues in the third quarter, highlighting the challenges facing new chief executive Slawomir Krupa as he tries to reset the fortunes of France’s third-largest lender.
A more resilient showing in SocGen’s investment bank compared with several European peers offset some of the pain, providing one bright spot for Krupa as he attempts a reboot after years of restructurings.
The group’s overall revenue was down 6.2 per cent to €6.2bn in the quarter, falling short of the €6.3bn forecast by analysts. Net profit beat expectations, coming in at €295mn compared with the €168mn predicted. But that was a drop of nearly 80 per cent from a year earlier after a series of charges it had previously flagged, including on deferred tax assets.
Shares in SocGen were up 1.5 per cent by mid-morning on Friday. The company also reported an improved capital position.
SocGen’s retail business was the major drag. French banks have yet to profit to the same degree as their European peers from rising interest rates, due in part to a so-called usury rate that controls how quickly they can pass on those increases to borrowers.
In addition, the payouts they have to make on some regulated savings accounts have risen, squeezing net interest income.
SocGen also said it had been hit after two-year hedges against low interest rates backfired when rates began to rise more rapidly than expected in 2022. The impact peaked in the third quarter with the hedges due to reach maturity by early next year, it said.
Krupa said the bank had “obviously taken lessons from what happened” and would integrate more radical scenarios in its planning in future.
“A very big banker [at SocGen] once told me ‘it’s easy to do banking when you look in the rear-view mirror’. Decisions are taken in a certain context,” he said.
Net interest income in SocGen’s French retail bank dropped 27 per cent in the quarter from a year earlier, when stripping out the impact of two regulated savings accounts. Net interest income in the French division is expected to fall more than 20 per cent for 2023 as a whole, the company said.
The bank said the outlook would improve in 2024 when net interest income would be “at a higher level or equal to the 2022 amount”.
Krupa, a SocGen veteran who previously ran the investment bank, took the reins in May after Frédéric Oudéa’s 15-year stint in the top job. Krupa’s first strategy update in September, in which he cut the group’s profitability targets and forecast muted revenue growth for the next three years, sent shares down more than 10 per cent.
“Revenue momentum is as weak as [SocGen]’s update at the capital markets day suggested,” Anke Reingen, analyst at RBC Capital Markets, said in a note on Friday.
In recent years, SocGen has tried to rein in risk taking at the investment bank and reshape the unit after it was hit by losses in its core equities business during the Covid-19 pandemic.
In the third quarter of 2023, overall revenues in SocGen’s investment bank dipped 0.4 per cent from a year earlier, outshining many rivals. It outperformed France’s BNP Paribas and Deutsche Bank in fixed income trading, reporting a 4.6 per cent revenue drop for that division.
