Societe Generale Beats as Equities Rebound Accelerates, Provisions Decline

(Bloomberg) -- Societe Generale SA extended a rebound in equities trading to beat the top Wall Street banks, giving a boost to Chief Executive Officer Frederic Oudea after he shook up the business following steep losses last year.

In a third quarter where most metrics beat analysts’ estimates, a 53% increase in trading stocks and derivatives, record revenue from financing and advisory, and lower provisions for bad loans stood out as the Paris-based lender almost doubled profit from a year earlier. The one sore spot: a fixed-income trading performance that was worse than at peers.

Oudea has kept a tight grip on the bank after complex derivatives backfired at the onset of the pandemic. He has reshuffled management in the equities business, built up the less volatile financing and advisory business, and he’s merging the bank’s domestic retail operations to lift profitability. That’s helped shares of SocGen rebound this year, making it one of the best-performing bank stocks in Europe.

But in a surprise move, SocGen announced that its deputy general manager and head of finance, William Kadouch-Chassaing, is leaving at the end of the month after 14 years with the bank. He will join investment firm Eurazeo SE as finance chief, Bloomberg reported late Wednesday.

Kadouch-Chassaing, whose first banking stint was at JPMorgan Chase & Co., joined SocGen in 2007 as a senior banker for the investment banking unit. Claire Dumas will take over as chief financial officer as of Dec. 1. Dumas, who joined the French lender in 1998, was deputy CFO since 2017, supervising the bank’s retail and financial services activities. She will report directly to Oudea.

SocGen shares rose as much as 4.8% to 30.83 euros in early Paris trading on Thursday.

The bank’s earnings represent “a strong set” of results, and show a “much higher” revenue momentum than expected, Jefferies analyst Flora Bocahut said in a note on Thursday.

Oudea expressed some caution on the economic outlook for 2022 in an interview with Bloomberg TV following the earnings release. The CEO also said it was too soon to judge whether current inflationary pressures would be temporary or structural, and that would become clearer toward mid-year.

“We remain positive”, said Oudea. “But we know that, yes, the economy could be a little but less dynamic than this exceptional year of rebound.”

Peer Performance

SocGen’s trading performance mirrored that of French rival BNP Paribas SA, which last week announced a new 900 million-euro ($1.04 billion) stock buyback after posting a 79% jump in equities trading and adding twice as much revenue as expected at its domestic markets unit. 

Both SocGen and BNP beat the 35% average gain in equities at the U.S. largest lenders, while trailing in fixed income. Revenue from the latter business fell 33% at SocGen and declined 28% at BNP, compared with a 13% drop on Wall Street.

SocGen’s financing and advisory unit, which contributes roughly a third of the investment banking revenue, posted revenue of 757 million euros, a 31% increase from a year earlier. The unit has become the focus of investment banking head and deputy general manager Slawomir Krupa, in a bid to reduce earnings volatility. 

The retail business also contributed to the better-than-expected results, with the French retail unit posting an 8% gain. The business is undergoing a revamp as Oudea merges the domestic networks. The third main unit, International Retail Banking and Financial Services, reported an 11% gain in revenue.

While BNP is weighing options to sweeten its dividend policy next year, SocGen intends to maintain its payout at 50% of annual profits. Oudea told Bloomberg he believes that is the “right level” and the bank will next year include buybacks as part of its returns to shareholders.

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