Pandemic sends French bank SocGen into the red

By Matthieu Protard and Marc Angrand

PARIS (Reuters) – France’s third-biggest listed bank Societe Generale tumbled to its first full-year loss for a decade as the COVID-19 pandemic rattled its businesses from retail banking to trading.

SocGen, which is in the midst of a shake-up to improve profitabilty, on Wednedsay reported that it had swung to a 2020 net loss of 258 million euros ($313.2 million) from a 3.25 billion euro net profit the previous year.

Its French retail banking revenue was down 5.6% with an accompanying 11.8% plunge in corporate and investment banking while cost of risk, which reflects provisions against bad loans, more than doubled to 3.3 billion euros.

Lenders globally have been grappling with the effects of the health crisis and setting aside funds to deal with loans that could turn sour, though that pressure has begun to ease in recent months.

SocGen Chief Executive Frederic Oudea said he expects earnings to rebound this year, with pandemic-related provisions falling from 2020 levels as economies gradually recover from the worst of the COVID-19 crisis, echoing French rival BNP Paribas.

SocGen also flagged an improving outlook for its markets business, having suffered a drop in trading revenue during the fourth quarter of last year in contrast to Wall Street rivals and some European banks that profited from pandemic-driven volatility.

“The momentum is rather encouraging,” SocGen’s head of global banking and investor solutions activities, Slawomir Krupa, said of trading so far this year.

The company said its relative poor trading performance was because of its exposure to the U.S. fixed-income market was lower than its competitors.

CORNER TURNED?

Analysts at Jefferies noted the drop in fixed-income revenue in the fourth quarter but said that earnings were solid overall “thanks to higher revenues, contained costs and lower than expected provisions”.

SocGen shares were up 3.3% at 1300 GMT.

Fourth-quarter net income dropped by 28% to 470 million euros on revenue down 6% while provisions against bad loans jumped 85.7% year on year to 689 million euros, but that was less than forecast by analysts.

The bank’s fourth-quarter revenue from fixed-income and currencies trading was down 16% year on year while equity trading revenue fell by 7%, though this both figures? If both, can we say “though these were an improvement” was an improvement from the previous three months and better than some analysts expected.

A review of SocGen’s corporate and investment banking operations is due on May 10 as Oudea continues a revamp of the markets business. The shake-up includes a departure from some areas after losses in structured products wiped out earnings at its equities business in the first half of last year.

The bank plans to pay a cash dividend of 0.55 euros per share in May, in line with recommendations set by the European Central Bank to preserve capital during the coronavirus crisis.

SocGen also said it would launch a share buyback amounting to about 470 million euros in the fourth quarter of this year.

As part of initiatives to boost profitability, SocGen is merging its two retail banking networks, which will result in the closure of 600 of its nearly 2,100 branches by 2025.

($1 = 0.8237 euros)

(Reporting by Matthieu Protard and Marc Angrand; Editing by Sarah White, Carmel Crimmins and David Goodman)