August 13, 2022
SocGen reports €1.5bn loss on Russia exit, but higher than expected revenue

French bank Société Générale lost €1.5bn in the second quarter after selling out of Russia, but reported higher than expected revenue in its business and set new growth targets.

France’s third-largest listed bank said on Wednesday that without the €3.3bn exemption from selling its Rosbank business in May, the underlying net profit in the period would have risen 11.5 percent to €1.5bn from a year earlier.

Its revenue rose 12.8 percent to €7.06bn, higher than the €6.6bn average expected in a Refinitiv survey of analysts, thanks to a strong performance across all of its business segments, from equities trading to its French retail bank.

It reported particularly strong earnings from bond trading, up 50 percent from a year ago, while revenue at its investment bank was up 18.3 percent.

Analysts expected SocGen to fall into a sizable quarterly loss of close to €2bn.

The bank has also set a target to grow revenue on an average of 3 per cent annually by 2025 and reach a return on tangible equity (ROTE), a key measure of profitability, of 10 per cent. That compared to the consensus ROTE forecast of 8.9 percent, analysts at RBC Capital Markets said.

Its shares rose 3.7 per cent in morning trade.

SocGen has been through a series of restructurings in recent years under outgoing chief executive Frédéric Oudia, including slashing its investment bank after a loss in 2020. It now hopes to capitalize on the potential for higher gains from rising interest rates.

It was one of the most exposed international banks to Russia before its exit this year.

Oudéa, one of the CEOs of Europe’s longest-serving bank, unexpectedly announced in May that he would not renew his term in 2023, after 14 years. SocGen has since launched a search to replace him, and is looking at candidates from outside the bank. As well as internally, according to people familiar with the details.

Oudia told reporters on Wednesday that a decision on his replacement would come in the autumn.

He said the bank was in “cautious but not disastrous” mode as economies across Europe faced a more difficult outlook due to high inflation and chaos in energy markets due to Russia’s war in Ukraine.

“There are a lot of uncertainties. But today we don’t see anything from a cost standpoint of our risk,” said Oudia, asked about the possibility of rising defaults.

SocGen is in the process of merging two large French branch networks and closing some offices, and is expanding its car leasing business with the €4.9bn acquisition of LeasePlan.

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