SocGen’s turnaround plan on track as it ups revenue forecast

PARIS (Reuters) – French bank Societe Generale on Tuesday raised its full-year forecast after swinging to a profit in the second quarter on lower pandemic-related charges for bad loans and a rebound in its domestic retail banking business, sending its shares higher.

In a sign that Chief Executive Frederic Oudea’s turnaround strategy is starting to pay off, Societe Generale now expects revenue to grow in all its businesses this year, including in French retail banking, which had been a weakspot.

Under pressure to boost profitability, Oudea has been trying to revive the lender after losses from stock-linked derivatives wiped out equity trading in the first and second quarters of 2020, whilst a cumbersome retail banking structure hindered growth.

France’s third-largest listed lender, after BNP Paribas and Credit Agricole SA, said its cost of risk, which reflects provisions against bad loans, would be lower than expected in 2021 at 20 to 25 basis points, down from a previous forecast of 30 to 35 basis points.

LASTING RECOVERY

Shares in SocGen rose 5.23% to 26.15 euros at 0801 GMT. The stock has more than doubled since its drop to near 30-year lows in autumn last year when it closed at 10.90 euros on Sept. 25, according to Refinitiv data.

“CIB (corporate and investment banking) turnaround is on track and French retail top line also surprised positively with a strong +8% year-on-year rebound,” analysts at J.P. Morgan Cazenove said in a note.

SocGen said its cost of risk fell 88.9% in the second quarter, mirroring that of rivals including Spain’s BBVA-RESULTS-c99e7e50-9fd8-4e1b-a256-769b32cf5e6e>BBVA and BNP Paribas, which slashed provisions for unpaid loans as the global economy was gradually recovering from the worst of the COVID-19 crisis.

The lender posted second-quarter net income of 1.44 billion euros ($1.71 billion), compared with a loss of 1.26 billion euros a year earlier. Revenue rose 18.2% to 6.26 billion euros.

Oudea said at a news conference that he expected the rebound in activities to last.

In France, where the government ended a third nationwide lockdown in mid-May, retail banking revenue rose 8.7%.

Revenue was up 24.5% in its corporate and investment banking businesses, which SocGen began revamping two months ago by shifting resources into dealmaking and reducing its trading arm’s exposure to market swings.

Equity trading revenue was five times higher than a year earlier, while fixed income and currency trading fell 33%.

($1 = 0.8420 euros)

(Reporting by Matthieu Protard; Additional reporting by Rachel Armstrong in London and Clement Martinot in Gdansk; Editing by Christian Schmolllinger and Anil D’Silva)

PARIS (Reuters) – French bank Societe Generale on Tuesday raised its full-year forecast after swinging to a profit in the second quarter on lower pandemic-related charges for bad loans and a rebound in its domestic retail banking business, sending its shares higher.

In a sign that Chief Executive Frederic Oudea’s turnaround strategy is starting to pay off, Societe Generale now expects revenue to grow in all its businesses this year, including in French retail banking, which had been a weakspot.

Under pressure to boost profitability, Oudea has been trying to revive the lender after losses from stock-linked derivatives wiped out equity trading in the first and second quarters of 2020, whilst a cumbersome retail banking structure hindered growth.

France’s third-largest listed lender, after BNP Paribas and Credit Agricole SA, said its cost of risk, which reflects provisions against bad loans, would be lower than expected in 2021 at 20 to 25 basis points, down from a previous forecast of 30 to 35 basis points.

LASTING RECOVERY

Shares in SocGen rose 5.23% to 26.15 euros at 0801 GMT. The stock has more than doubled since its drop to near 30-year lows in autumn last year when it closed at 10.90 euros on Sept. 25, according to Refinitiv data.

“CIB (corporate and investment banking) turnaround is on track and French retail top line also surprised positively with a strong +8% year-on-year rebound,” analysts at J.P. Morgan Cazenove said in a note.

SocGen said its cost of risk fell 88.9% in the second quarter, mirroring that of rivals including Spain’s BBVA-RESULTS-c99e7e50-9fd8-4e1b-a256-769b32cf5e6e>BBVA and BNP Paribas, which slashed provisions for unpaid loans as the global economy was gradually recovering from the worst of the COVID-19 crisis.

The lender posted second-quarter net income of 1.44 billion euros ($1.71 billion), compared with a loss of 1.26 billion euros a year earlier. Revenue rose 18.2% to 6.26 billion euros.

Oudea said at a news conference that he expected the rebound in activities to last.

In France, where the government ended a third nationwide lockdown in mid-May, retail banking revenue rose 8.7%.

Revenue was up 24.5% in its corporate and investment banking businesses, which SocGen began revamping two months ago by shifting resources into dealmaking and reducing its trading arm’s exposure to market swings.

Equity trading revenue was five times higher than a year earlier, while fixed income and currency trading fell 33%.

($1 = 0.8420 euros)

(Reporting by Matthieu Protard; Additional reporting by Rachel Armstrong in London and Clement Martinot in Gdansk; Editing by Christian Schmolllinger and Anil D’Silva)