By Mathieu Rosemain
PARIS (Reuters) -Societe Generale reported a forecast-beating 11% jump in third-quarter profit on Thursday, as CEO Slawomir Krupa stepped up his drive to slash costs.
The bigger-than-expected fall in expenses, as well as signs that a turnaround plan for the retail unit is beginning to work, offset a mixed performance at SocGen’s investment bank.
Group net income rose to 1.52 billion euros ($1.77 billion), up from a year earlier and more than 200 million euros above the average analyst estimate.
Sales fell 2.7% to 6.66 billion euros over the period, above expectations, because of a smaller business footprint following asset disposals.
“SG results beat consensus expectations with cost control the positive stand out in our view,” Royal Bank of Canada said in a note to clients.
In investment banking, sales rose slightly but trailed BNP Paribas, Deutsche Bank and Wall Street rivals during a bumper period for trading.
Fixed income and currency trading revenues were up 12%, while revenues from equities fell 6.7%, reflecting strong year-earlier comparables, exchange rate effects and lower market volatility, it said.
The French retail unit showed signs of recovery, with net interest income rising and mortgage lending surging 74%. SocGen also benefited from lower remuneration rates on regulated savings, such as the Livret A.
Krupa, who took the helm in 2023, launched a turnaround plan two years ago in a bid to end SocGen’s reputation as a European laggard labouring under poor profitability and a bloated cost base.
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After initially struggling, his policy of cost cutting, asset disposals and strengthening the bank’s capital position is winning over investors.
“Quarter after quarter through the cycle, we continue to execute our strategic roadmap with discipline by maintaining a strong capital position, strict cost control and prudent risk management,” Krupa said.
SocGen shares have doubled this year, against a 49% rise across the European banking sector, although that follows a long period of underperformance.
The appeal of Krupa’s cost-cutting drive explained part of this rise.
The bank’s cost-to-income ratio, an efficiency gauge showing how much a bank spends to generate each euro of revenue, came in below expectations at 61%, and below its annual target of sub-65%.
The group’s return on tangible equity, a key measure of profitability, rose to 10.7%, above the expected 8.9% but still far below European rivals.
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French bank shares have come under pressure in recent months with the country facing its worst political crisis in decades and investors questioning the sustainability of government finances.
Both S&P Global Ratings and Fitch have downgraded France’s long-term debt, which could raise funding costs for lenders like SocGen.
SocGen’s digital BoursoBank, a cornerstone of Krupa’s strategy, crossed a threshold of 8 million clients in July, which was ahead of schedule.
The customer gains came in spite of intensifying competition in France, with Britain-based fintech Revolut recently establishing its EU headquarters in Paris and targeting 10 million clients in the country by 2027.
($1 = 0.8575 euros)
(Reporting by Mathieu Rosemain; Editing by Tommy Reggiori Wilkes and Thomas Derpinghaus)
