Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Societe Generale SA (SCGLF, Financial) reported a 24% increase in net income compared to last year, reaching EUR1.1 billion in Q2 2024.
- The cost-income ratio improved to 68.4% for the quarter, moving closer to annual targets.
- Revenues increased by 6% year-over-year, driven by strong performance in Global Banking and Investment Solutions, International Retail Banking, and higher margins at Ayvens.
- The bank maintains strong liquidity and capital ratios, with an LCR of 152% and a CET1 ratio of 13.1% post-distribution provision.
- BoursoBank continues to grow, reaching 6.5 million clients and contributing to the group's strategic roadmap with a EUR1 billion investment dedicated to the energy transition.
Negative Points
- French Retail NII is facing headwinds due to an increased share of interest-bearing deposits and slower loan origination in a muted environment.
- Operating expenses increased slightly to EUR4.6 billion, partly due to perimeter effects linked to LeasePlan.
- The cost of risk remains stable but high at 26 basis points, with specific market impacts affecting the overall figure.
- Consumer Finance revenues are down by 5% year-over-year, impacted by the effect of the usual rate on loans originated until last year.
- The bank's CET1 ratio is slightly down compared to previous quarters due to expected impacts from the creation of Bernstein and regulatory inspections by the ECB.
Q & A Highlights
Q: Can you give us what are the underlying drivers for the change in the guidance for French Retail? How do you see the recovery of French Retail into next year?
A: The new estimate for full-year 2024 on the French Retail NII takes into account two main new elements: a higher deposit beta than expected due to an increase in interest-bearing products, and lower volume of loans due to a less conducive market and a prudent origination policy. These factors have led to a revised estimate of EUR3.8 billion for 2024.
Q: Can you give us an update on the capital trend and the regulatory situation?
A: We have a good level of confidence in capital buildup through earnings and the efficiency of our asset-light model. We expect the core Tier 1 ratio to be above 13% at the end of the year. Regarding regulatory impacts, we had estimated a 35 basis points minimum impact for the year, with 20 basis points already recognized by the end of June.
Q: Why do you think you are more impacted by the deposit mix shift compared to competitors?
A: Our customer base, both in corporates and individuals, is more agile and moves quicker towards term deposits or financial products. Additionally, we have captured a lot of savings from clients, which is reflected in the increase in life insurance inflows.
Q: Can you provide more details on the assumptions behind the EUR3.8 billion NII guidance for French Retail?
A: The financial projections are built at a granular level, considering loan outstanding, production, and deposit types. We assume continued pressure on the deposit beta and a similar trend in loan production and deposit mix until the end of the year.
Q: What is the outlook for BoursoBank given its rapid client acquisition?
A: BoursoBank has demonstrated its ability to balance client acquisition and profitability. We have adjusted the acquisition pace while reducing costs. At this stage, we are not changing the target of 8 million clients by 2026.
Q: Can you explain the EUR80 million quarter-on-quarter decline in NII for French Retail?
A: The decline is due to a higher deposit beta, a decrease in loan outstanding, and the impact of loan production. These factors offset the benefits of replacing old deposits at higher prices.
Q: What is your view on the consumer credit business and its future prospects?
A: Consumer finance revenues have declined due to lower margins on transactions originated last year. However, we expect a gradual recovery in commercial margins and slightly lower revenues for the full year compared to 2023.
Q: What are your expectations for the cost of risk and asset quality?
A: The cost of risk in France was mainly due to two market sizes this quarter. Overall, we see normalization rather than deterioration in asset quality, with idiosyncratic elements being non-correlated.
Q: Can you provide updated guidance on market revenues for the Investment Bank?
A: Given the strong performance in the first half, we expect to exceed EUR5.4 billion in market revenues for the year under normal market circumstances. Demand remains strong across all asset classes.
Q: What are your assumptions for the distribution rate and cost savings for the second half?
A: The distribution policy remains 40% to 50% of reported earnings, with the decision to be made by the Board in January. We have realized EUR250 million in cost savings in H1 and expect the same amount in H2.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
