France’s Societe Generale beats profit forecast in second quarter as retail banking returns

LONDON — Societe Generale has beaten analysts expectations in the second quarter of this year, helped by a bounce back in retail banking in France and fewer loan defaults.

The lender reported net income of 1.44 billion euros ($1.71 billion) for the second quarter. Analysts had expected a 704 million euro net profit for the three-month period, according to Refinitiv.

The latest results follow a “record” quarter at the start of 2021, when profit reached 814 million euros, and mark a significant swing to profit from the loss of 1.26 billion euros posted a year ago, at the height of the Covid-induced economic crisis.

The second quarter “was marked by the strong revenue momentum, continued cost discipline and a very low cost of risk resulting from very few loan defaults,” Frederic Oudea, the group’s CEO, said in a statement. He noted that the results for the first half of 2021 are the best in five years.

The latest results were supported by the French bank’s retail unit, which reported net income of 438 million euros — a significant growth from the 60 million euros reported a year ago.

This was due to a higher number of home loans and consumer credit.

“We are recording, as you said, a strong rebound, of course, compared with last year, where it was a period of lockdowns. So we see in particular good dynamism on the commissions, in particular on financial commissions,” Oudea told CNBC on Tuesday.

“People are saving money, but they are looking at investment solutions, which makes sense in a world of very low and even negative interest rates.”

Looking at the investment banking unit, revenues rose more than 24% from a year ago, and the bank cited “strong momentum” in its equity businesses and financing and advisory activities.

However other divisions struggled in the face of a different market environment. Performance in the bank’s fixed income and currency business fell 33%, for example.

Some other highlights from this quarter:

• Revenue reached 6.3 billion euros, a 18.2% increase from a year ago.
• Operating expenses rose more than 6% from a year ago to 4.1 billion euros.
• The CET 1 ratio, a measure of bank solvency, stood at 13.4% versus 13.5% at the end of the previous quarter.

“I am positive for the second half because we see good economic dynamic,” Oudea told CNBC.

The French bank said it expects revenues to increase across all businesses going forward, and revised down the net cost of risk for the full year by between 20 and 25 basis points.

Societe Generale also confirmed it will start a share buyback program in the fourth quarter, of around 470 million euros, and proposed a dividend of 1.2 euros per share in relation to the first half of the year.

The stock is up 49% year-to-date.