On February 6, France's Societe Generale announced a doubling of its profit in the fourth quarter, driven by a resurgence in retail banking and robust equity trading. The success of its turnaround plan, focusing on cost control, asset sales, and margin enhancement, has brought the company closer to achieving its key 2026 profitability target.
CEO Slawomir Krupa emphasized, "We have a clear plan, precise targets, and a track record of delivery, and we will continue to do so." The positive results were acknowledged by Royal Bank of Canada, stating that ongoing cost control measures should instill confidence in achieving future goals.
Societe Generale's shares surged by 9.1% following the announcement of a quarterly net income of 1.04 billion euros, surpassing analyst predictions. Total revenue also exceeded estimates, climbing by 11.1% to 6.62 billion euros.
The bank's investment banking unit, accounting for a significant portion of its earnings, experienced a 12% increase in revenue year-on-year. Although the performance was positive, it fell short of competitors like BNP Paribas.
Societe Generale reported surpassing its client acquisition goal for BoursoBank, the leading online bank in France. Furthermore, the bank benefited from its involvement in financing Elon Musk's acquisition of Twitter in 2022.
Krupa, appointed CEO in 2023 to address previous underperformance in controlling costs and achieving targets, aims to boost the group's return on tangible equity to 9%-10% by 2026. While profitability has shown improvement, it still lags behind industry peers, with return on tangible equity reaching 6.9% in 2024 and targeting over 8% for the current year.
Analysts are cautiously optimistic, awaiting sustained earnings improvement as part of Krupa's revitalization strategy. They have noted a significant rebound in the French retail unit's net interest income in the fourth quarter, following challenges stemming from interest rate fluctuations.
Societe Generale plans to distribute 50% of its net income to shareholders and execute a larger-than-anticipated share buyback program of 872 million euros. However, the dividend payout of 1.09 euros per share was slightly lower than anticipated. (1 USD = 0.9603 euros)