LONDON – Societe Generale exceeded analyst expectations on Wednesday with a “significant improvement” in business in the second half of 2020 despite the coronavirus pandemic.
The French bank posted a net profit of 470 million euros in the fourth quarter. Analysts were expecting a net profit of 252 million euros for the quarter and a loss of 822 million euros for the year. The French lender ended 2020 with a net loss of € 258 million.
“The good news is that we have stabilized income from capital market activities at € 1 billion. Overall, the second main reason is the quality of the loan portfolio, which has not deteriorated,” said Frédéric Oudéa, head of the group’s executive officer, told CNBC on Wednesday.
He added that “the third aspect is the very high CET 1 ratio that allows us to effectively resume the dividend with a lot of convenience.”
Further highlights for the last quarter of 2020:
- Sales amounted to 5.8 billion euros, a decrease of 6% compared to the previous year.
- Operating expenses decreased 3.4% compared to the fourth quarter of 2019.
- The CET 1 rate, a measure of the solvency of banks, was 13.4% compared to 12.7% in the previous year.
Oudéa said in a statement that “the fourth quarter results provide further confirmation of the recovery in our businesses seen in the third quarter after a start to the year marked by the effects of the Covid crisis.”
The lender posted a € 1.26 billion loss in the second quarter as Europe struggled with the first wave of coronavirus. However, Societe Generale returned to profit in the following two quarters.
Drop in client activity
Despite expectations in the fourth quarter, Societe Generale recorded a decline in customer activity in the bond and currency business. This contributed to a 94.1% annual decline in net income in Global Banking and Investor Solutions.
Speaking to CNBC, Oudéa said: “We are back in this general transition. The start of the year is very encouraging and I expect revenues to return to normal in the coming months.”
The French bank set up loan loss provisions of EUR 367 million in the fourth quarter.
Going forward, Oudéa said we continue to expect “continued economic recovery” as the rollout of the Covid-19 vaccine continues, and he hopes 2021 will be a year of recovery.
Dividend and share buyback
The French bank has announced that it will distribute a cash dividend of EUR 0.55 per share in accordance with European regulations. The European Central Bank has asked lenders to be cautious with dividend distributions and share buybacks at least until September in light of the ongoing economic crisis.
In this context, Societe Generale announced that it would buy shares worth around 470 million euros in the fourth quarter of 2021, provided that the ECB’s recommendation is not extended.
The French bank has also announced that its risk costs will decrease in 2021.
The stock is down over 43% in the past 12 months.
