SocGen lifts targets after French retail rebounds sharply

Societe Generale, France’s third-largest listed bank, raised its annual profit target on Thursday (Jul 31) after a strong rebound in its French retail business lifted second-quarter results above expectations.

The lender raised its 2025 return on tangible equity target, a key profitability measure, to around 9 per cent from a previous goal of above 8 per cent.

It now expects its cost-to-income ratio, a key efficiency indicator, at below 65 per cent this year, versus a previous target of below 66 per cent.

The SocGen division that houses its core French retail business doubled its net earnings in Q2, driven by a 15 per cent increase in net interest income (NII). NII is the difference between what the bank earns on loans and pays on deposits.

The rebound in the retail unit builds on momentum seen in Q1, as chief executive officer Slawomir Krupa, who took the reins in 2023, presses ahead with turnaround efforts.

Group net income jumped 31 per cent to 1.5 billion euros (S$2.2 billion) in Q2, compared to the same period last year, well above the 1.2 billion euros estimate of 15 analysts compiled by the company.

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Revenues over the period were up 1.6 per cent to 6.8 billion euros, also beating analysts’ average estimate.

In addition, the bank announced an interim dividend of 61 euro cents per share to be paid in October. It plans a one billion euro share buyback in August.

Cost cuts

“We remain fully focused on the precise and methodical execution of our 2026 road map, to continue delivering sustainable and profitable growth for all our stakeholders,” Krupa said.

The hard-driving company veteran was brought in to revive SocGen’s shares after years of underperformance. He recently drew attention in France by urging staff to review remote working policies and spend at least four days a week in the office.

Investor perception of the bank had long been hurt by repeated missed targets, the fallout from a rogue trading scandal during the 2008 financial crisis, and a costly exit from Russia following the country’s invasion of Ukraine.

Krupa’s plan, centred on reducing expenses, asset disposals and strengthening the bank’s capital, initially underwhelmed the market. But improved cost management has helped shares climb around 120 per cent in the past year.

SocGen’s valuation, however, still remains well below its book value.

The French lender’s investment banking division, its largest, posted revenue in line with analysts expectations.

Sales from trading in fixed income and currencies rose 7.3 per cent to 615 million euros, trailing BNP Paribas’ 27 per cent jump.

Equities trading revenue fell 2.9 per cent to 962 million euros. SocGen’s trading business benefited less from increased market volatility sparked by the wave of tariffs rolled out by US President Donald Trump than Wall Street peers and larger French rival BNP Paribas. REUTERS