French bank Societe Generale has today reported a sharp drop in fourth-quarter net income, although the lender beat analyst expectations thanks to signs of recovery in its domestic retail business and stable investment bank trading revenue.
The results capped a challenging year of transition, SocGen said in a statement.
The year was marked by the costly acquisition of LeasePlan, a hedging policy against low rates at the retail unit that backfired when rates jumped, and a badly-received strategic plan.
France's third-biggest listed bank said group net income in the final three months of 2023 tumbled nearly 60% from a year earlier to €430m, beating the €333m median average of 13 analyst estimates compiled by the company.
Group revenue in the quarter dropped by almost 10% to about €6 billion, above the €5.86 billion estimate of the company-compiled consensus.
Sales from trading in SocGen's investment bank slipped by 0.8%, the bank said, as a strong showing for equities offset a 22% decline in fixed income and currencies.
"The change in trajectory in French retail banking revenues is encouraging and it appears that SG is moving faster on its restructuring" Royal Bank of Canada analysts said in a note to clients, adding however that there were "a lot of moving parts" in SocGen's results.
SocGen has struggled recently, with its shares lagging rivals and analysts questioning its low profitability and reliance on volatile investment bank earnings.
Chief executive Slawomir Krupa in September unveiled a strategic plan that promised little in the way of revenue growth but pledged to slash costs and sell non-performing assets.
The bank has some way to hit its targets: return on tangible equity (ROTE), a measure of profitability, stood at 1.7% at end-2023, against Krupa's target for 2026 of between 9% and 10%.
In 2024, the French lender targets a yearly growth in sales of at least 5% and a ROTE of more than 6%.
French banks have not benefited as much as euro zone peers from soaring rates because they tend to pay more interest to depositors.
But SocGen said the fourth quarter marked the "beginning of the rebound in net interest income" (NII) - the difference between what banks make on loans and pay out on deposits.
NII rose by 7% in the fourth quarter compared to the third, in line with the bank's guidance.
The NII generated by SocGen's French retail unit was still down by €321m in the fourth quarter compared to the same period last year. In total, the NII of French retail activities retreated by close to €1.1 billion in 2023.
SocGen is also spending money to acquire clients for its online brand bank BoursoBank, increasing the number of clients by a record of 566,000 in the fourth quarter of 2023 to reach a total of 5
