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SocGen reports 64% slide in annual profits but beats market expectations

We expect more pressure on revenue this year, Société Générale CEO says

Societe Generale on Wednesday reported a 64% drop in annual net profits for 2022, weighed on by lower activity in its domestic banking unit, currency effects and increased operating expenses.

The French bank said net income came in at 1.16 billion euros ($1.24 billion) for the final quarter of 2022, bringing its annual profit to 2.02 billion euros. In comparison, the bank had posted 5.6 billion euros in net profit at the end of 2021.

The latest results came in higher than expectations. Analysts had estimated a net income of 905 million euros for the quarter and 1.5 billion euros for the full year, according to Refinitiv.

“The Group is confident of being able to reap the benefit of ongoing projects and business developments, confirms its financial guidance for 2025, and is embarking with determination on 2023, a year of transition in many respects,” CEO Fréderic Oudéa said in a statement.

Here are other highlights from the results:

  • Revenues rose 8% over the year to 28.1 billion euros.
  • Operating expenses increased by 5.9% over the last 12 months to 18.6 billion euros.
  • CET1 ratio, a measure of bank solvency, stood at 13.5%, versus 13.1% at the end of the third quarter.

Based on last year’s performance, the lender said it would pay out 1.70 euros per share to shareholders and conduct a share buyback program of around 440 million euros this year.

However, the bank said the outlook for 2023 is challenging, adding that it will be a “transition” year where its domestic unit is expected to report lower revenues off the back of changes to monetary policy in the region.

Speaking to CNBC’s Charlotte Reed, Oudéa said “in 2023, we expect more pressure on the revenues,” citing the fact that, in France, banks do not benefit “immediately” from the normalization of interest rates.

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Share performance of Societe Generale in comparison with its French peer BNP Paribas.

The European Central Bank raised rates four times in 2022 and announced another 50 basis point increase earlier this month. This has marked a significant shift in monetary policy after several years of negative rates. In principle, higher rates represent higher margins for commercial banks.

More broadly, Oudéa warned of a “lot of uncertainty.”

“We should see in this central scenario inflation peaking and going progressively down with also rates going down from 2024 onwards, that’s the central scenario, there is a lot of uncertainty that remains — let’s face it, you can have a scenario with higher inflation for longer and which would mean higher rates going forward,” he said.

The latest results also represent the last annual numbers under the leadership of CEO Fréderic Oudéa, who’s been in the job for more than a decade. Slawomir Krupa, who’s been leading the investment banking unit, is due to take over in the coming months.

Shares of the French lender are down more than 20% over the last 12 months.

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