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Paris — Buoyant retail-and-investment banking activity helped Societe Generale to report a smaller-than-expected loss in the second quarter as it absorbed a €3.3bn hit after the sale of its Russia business.
The French bank, which is seeking a new CEO, on Wednesday reported a €1.48bn loss ($1.51bn), while analysts on average had expected a loss of more than €2bn.
SocGen’s shares rose 3% and were the strongest performers within the pan-European banking index.
Net banking income rose just over €7bn, about €600m higher than expected, while operating expenses came in lower at €4.46bn, the bank said, as it confirmed the launch of a €915m share buyback plan.
“These are excellent results, with the good news of the share buyback and ambitious but achievable goals,” Jerome Legras, head of research at Axiom Alternative Investments, said.
The group’s return on tangible equity (ROTE) profitability ratio stood at 10.5%. The group said it is aiming for profitability (ROTE) of 10% and a CET 1 ratio of 12% in 2025.
“We confirm our ability to deliver profitability of 10% on the basis of a target core Tier 1 capital ratio of 12%", CEO Frederic Oudea said in a statement.
Among other ambitions set for the next three years, the bank seeks to deliver a cost-to-income ratio of 62 or below, and maintain a payout ratio of 50% of its profits.
Revenue rose 23.3% to €1.5bn in the global markets business, where equity trading activity increased by 7.5% to €833m, while fixed income and currency activities increased 50% to €683m.
Meanwhile, French and international retail reported a rise in net banking income of 8.5% to €2.26bn and 12.7% to €1.27bn respectively.
Looking for a new CEO
In May, Societe Generale closed the sale of its Russian business, Rosbank, to the Interros group.
The same month, Oudea took investors by surprise when he announced he would step down next year as the CEO after running the lender for 15 years and that his successor would be announced in the autumn.
Speculation on the future leader of France’s third-biggest listed bank has so far centred around Sebastien Proto, now engaged in merging SocGen’s retail networks in France, as well as Slawomir Krupa, head of global banking and investor solutions activities.
Jacques Ripoll, who just left Credit Agricole SA, Philippe Heim, the head of France’s postal bank and Jean Pierre Mustier, former CEO of Italy’s UniCredit are among former SocGen executives mentioned as potential external suitors, but no outside candidate has emerged as a clear front-runner.
SocGen’s results follow rival BNP Paribas, which reported a better-than-expected profit on Friday as business remained buoyant across business lines.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.