SocGen raises dividend payout after swing to fourth quarter profit

Wednesday 12 February 2014 11.06
SocGen CEO Frederic Oudea says bank has accomplished the 'transformation' of its balance sheet
SocGen CEO Frederic Oudea says bank has accomplished the 'transformation' of its balance sheet

French bank Société Générale today pledged to return more capital to shareholders in 2014.

This comes after a swing to a fourth quarter profit capped a long-running push to boost the strength of its balance sheet.

France's second biggest listed bank has sold assets, cut jobs and pulled out of markets like Greece and Egypt as European lenders race to boost their closely watched capital ratios in the wake of the financial crisis and the euro zone's debt woes.

With a core Tier 1 capital ratio of 10% at the end of December under tougher Basel III rules, ahead of some rivals like Deutsche Bank, the bank is targeting a dividend payout ratio of 40% in 2014, up from 27% in 2013, SocGen's chief executive told Reuters.

"We have accomplished the transformation of the balance sheet at year-end 2013," Frederic Oudea said in an interview.

"SocGen has a model which is able to grow operating income, which will benefit from a decrease in the cost of risk...(and) which can effectively use more capital efficiently," he added. 

The bank is moving on from an era of protecting its balance sheet towards returning more capital and may consider "small" acquisitions that fit into its business model, the CEO added, with loan-loss provisions expected to fall progressively.

SocGen reported a fourth-quarter net profit of €322m, compared with a €471m loss the same time the previous year. Loan-loss provisions were down by 20%, while writedowns on the acquisition value of assets were cut by almost 90%.

The bank reiterated its return-on-equity target of 10% by the end of next year and said it would pay a 2013 dividend of €1 per share, up from 45 cent in 2012.

Although the bill for one-off charges was lighter overall than a year ago, SocGen booked a previously announced €445.9m fine following attempts by one employee to manipulate the Euribor rate from March 2006 to May 2008.

SocGen's Oudea said the bank's bonus pool for 2013 would be down from 2012 as a result and insisted that SocGen had a good risk culture and had learned its lesson from the crisis.