SocGen Shares Rise After Bank Strengthens Capital - Update
August 01 2019 - 4:40AM
Dow Jones News
--Societe Generale's core Tier 1 ratio rose to 12% at the end of
June from 11.5% in March
--SocGen's quarterly net profit fell 14% to 1.05 billion
euros
--Shares rise more than 5% in morning trade
By Pietro Lombardi
Societe Generale SA (GLE.FR) shares jumped after the bank
strengthened its capital in the second quarter, while lower revenue
and restructuring costs contributed to a fall in net profit for the
period.
The results follow a consensus-beating performance by French
peer BNP Paribas SA (BNP.FR) and come as SocGen restructures after
weak trading revenue hit its investment-bank business in the final
quarter of last year, forcing the bank to cut its 2020
profitability target and promise further cost cuts.
SocGen's core Tier 1 ratio, a key measure of capital strength,
rose to 12% at the end of June from 11.5% in March, helped by the
sale of some businesses and the payment of part of its dividend in
shares.
"Based on what has been achieved in H1 2019 the capital debate
is no longer an issue, if they are able to stick to the plan,"
Jefferies analysts said.
Quarterly net profit fell 14% to 1.05 billion euros ($1.16
billion), France's third-largest listed bank by assets said
Thursday.
Net banking income, the bank's top-line revenue figure, fell
2.6% on the year to EUR6.28 billion.
The bank showed continuing improvement in capital, Citi analysts
said.
"These results are a step in improving market confidence on
management ability/focus to deliver," Citi said.
Shares traded 5.1% higher at 0755 GMT.
"Societe Generale has provided further evidence of the
successful execution of its strategic plan with two priority
financial objectives: increasing its level of capital and improving
profitability," Chief Executive Frederic Oudea said.
SocGen booked a EUR227 million charge related to the
restructuring of its corporate and investment banking business.
In April, the lender presented a plan to cut nearly 1,600 jobs
globally after a slump in investment-banking revenue in the fourth
quarter. The plan followed a cut to its 2020 profitability target.
The global markets and investor services--which includes fixed
income and equity trading and securities services--will bear the
brunt of the job cuts.
"Only a few months after it was announced, Global Banking &
Investor Solutions' adaptation plan has entered the execution
phase," Mr. Oudea said.
The global banking and investor-solutions business, which
includes investment banking and asset management, reported a 6.1%
fall in second-quarter revenue, while profit fell 46%. Global
markets revenue fell 9.2% "impacted by still challenging market
conditions," it said. Fixed-income revenue declined 9.7% on
year.
"The low interest rate environment in Europe and low volatility
observed in currency activities adversely affected Rate and
Currency activities" in the second quarter, it said.
Equities revenue fell 6.6%.
Net income fell 2.5% at the bank's French retail banking
operations while it was down 4.8% at the international retail
banking & financial services division.
Write to Pietro Lombardi at pietro.lombardi@dowjones.com
(END) Dow Jones Newswires
August 01, 2019 04:25 ET (08:25 GMT)
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