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France’s Société Générale beat profit expectations in the second quarter helped by falling charges on bad loans and cost-cutting measures, even as revenue slowed in the lender’s home market.
SocGen on Thursday reported net income of €900mn, exceeding the €732mn forecast by analysts in a Refinitiv poll. It had posted steep losses in the same period a year ago owing to its Russia exit.
Group revenues fell 8.9 per cent to €6.3bn, worse than expected in the poll, but costs rose at a slow pace and loan-loss charges of €166mn were far lower than the €424mn expected in consensus estimates cited by RBC Capital Markets analyst Anke Reingen.
“Cost control in the second quarter was encouraging but is also a reflection of weaker revenues,” Reingen said in a note.
“Revenues contracted due to the decline in the net interest margin in France and in market activities’ revenues against a backdrop of gradual normalisation after some particularly favourable years,” said chief executive Slawomir Krupa, who took over the role in May.
Krupa, a SocGen veteran and former head of the investment bank, has faced a constrained French market, as well as falling earnings from trading bonds and equities.
SocGen also said it had reached a settlement with US regulators over the way it kept records on unauthorised electronic messages. It did not give an amount, but guided on Thursday that any fine was lower than a €95mn charge it already recorded. Paris-based BNP Paribas last week reported a fine for the same issue, without disclosing the amount.
SocGen has been held back this year by a local consumer protection rule that caps the pace at which banks can pass on interest rate rises to households. French lenders have lagged regional rivals in reaping the benefits of a rapid rise in rates in the eurozone.
In France, SocGen’s retail banking revenues were down 13.6 per cent to €1.9bn. The bank and other French lenders such as Crédit Agricole have warned they were not likely to catch up with European peers posting higher retail bank sales until 2024. At BNP, which is more exposed to business lending than mortgages, the impact has been less pronounced.
French banks are also having to pay out a higher rate on a popular savings bank account called the Livret A than in recent years. That rate is linked to inflation and set by the government, and is contributing to a squeeze on banks’ margins.
SocGen’s earnings from trading bonds and equities also fell year on year, mirroring a trend at Wall Street rivals and BNP Paribas.
SocGen shares were up 1.6 per cent in early trading.
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