French bank Société Générale announced its second-quarter results for 2023.
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the French bank Société Générale On Friday it reported a smaller-than-expected 22% decline in first-quarter net income, as gains on equity derivatives sales offset further weakness at its retail bank and in fixed income trading.
France's third-largest listed bank, whose CEO Slavomir Krupa is seeking to end several years of poor performance and cut costs, said the group's net income during the first three months of the year amounted to 680 million euros ($729.30 million).
This represents a 22% decline from the previous year but still beats the €463 million average estimate of 15 analysts compiled by the company.
Sales fell 0.4% to 6.65 billion euros, above analysts' average estimate of 6.46 billion euros.
Supported by euro zone interest rates remaining higher for longer than expected, several European banks beat expectations for the first quarter, and some raised profit targets for the year.
French banks, including Société Générale, did not benefit much from higher interest rates due to the high cost of deposits in the country. Its shares have performed poorly, although analysts expect lenders to do better when interest rates fall.
Société Générale's investment banking division saw its profits jump 26.4% to 690 million euros, beating expectations, while revenue fell 5.1% to 2.62 billion euros during the quarter.
The bank said equity derivatives sales, an area in which Société Générale has historically been strong, performed well, as did its corporate finance services and advisory business.
Hedging policy
This offset a 17% decline in sales from trading in fixed income instruments and currencies, which was below the average performance of Wall Street firms and the French competition. Banque Nationale de Paris Paribas. Deutsche Bank Delivered a 7% increase in fixed income and currency trading revenues.
Société Générale said it was still suffering from a costly hedging policy aimed at protecting the bank from low interest rates, but it had backfired. SocGen cost €300 million in the first quarter, plus €1.6 billion in 2023.
The bank no longer reports figures for its French retail activities, which are more important to its profits than BNP Paribas, as a standalone business.
Société Générale said the transfer from demand deposits to a structured savings account with a fixed interest rate affected its results.
According to a recent study by UBS, French deposits were the most expensive in Europe when interest rates were negative. But they increased in cost just as quickly as the European average when interest rates and inflation rose.
Société Générale's share price development has lagged behind its peers over the past three years, with shares rising by 9%, compared to a rise of 26% for BNP and 13.5% for BNP. Credit Agricole. The STOXX Europe 600 bank basket rose 55% during this period.
Krupa, who took over just a year ago, disappointed investors last September by delaying a key profitability target by a year, amid stagnant sales, until 2026.
He pledged to revive the stock by cutting costs and hitting targets, while selling non-core assets and investing to take online Borso Bank and its expanded Evins car rental group.
