Societe Generale, one of the largest French banks, reported a 40% decline in net income for the fourth quarter of 2023, as its revenues from trading and investment banking fell amid market volatility and low interest rates.
The bank posted a group net income of 430 million euros, slightly above a consensus analyst forecast of 404 million euros, according to LSEG data, but well below the 1.07 billion euros recorded for the final quarter of 2022. The bank attributed the drop mainly to a decline in net interest income in French retail, and its private banking and insurance division, along with the negative impacts from unwinding hedges.
Net banking income and cost-to-income ratio decline
Net banking income, a key measure of a bank's performance, dropped 9.9% year-on-year to 5.96 billion euros, missing the analyst expectations of 6.15 billion euros. The bank's cost-to-income ratio, a measure of efficiency, deteriorated to 78.3%, compared to 74.1% a year ago.
Global banking and investor solutions division suffers from low FICC revenues
The bank's global banking and investor solutions (GBIS) division, which includes corporate and investment banking, asset management and securities services, saw its revenues decrease by 7.8% year-on-year to 2.35 billion euros, mainly due to lower revenues from fixed income, currencies and commodities (FICC) trading. The bank said the FICC revenues were impacted by "a challenging environment marked by low volatility and low interest rates.
French retail banking division hit by low rate environment and Covid-19 impact
The bank's French retail banking division, which accounts for about a third of its revenues, also suffered a 9.9% year-on-year decline in revenues to 1.95 billion euros, as net interest income was hit by the low rate environment and the impact of the Covid-19 pandemic on loan demand and fee income.
International retail banking and financial services division posts revenue growth
The bank's international retail banking and financial services (IBFS) division, which includes its activities in Europe, Africa, Asia and Russia, was the only segment that posted a revenue growth of 2.4% year-on-year to 1.66 billion euros, driven by a strong performance in Africa and Russia.
CET1 ratio improves and dividend and buyback program announced
The bank's common equity tier 1 (CET1) ratio, a measure of its financial strength, improved to 13.1% at the end of 2023, from 12.5% a year ago, as the bank reduced its risk-weighted assets and increased its capital base. The bank said it was confident to reach its target of 13.5% by the end of 2024.
The bank announced that it would propose a cash dividend of 0.90 euros per share to its shareholders, and launch a share buyback program of 280 million euros, equivalent to 0.35 euros per share. The bank said the dividend and the buyback program were in line with its payout policy of distributing 50% of its underlying net income.
CEO comments on the results and the outlook
The bank's CEO, Slawomir Krupa, said 2023 was "a year of transition and transformation" for the bank, which is targeting a revenue growth of 5% or above in 2024. He said the bank was focused on executing its strategic plan, which involves simplifying its business model, reducing its costs, enhancing its digital capabilities, and strengthening its balance sheet.
He also said the bank was well positioned to benefit from the economic recovery and the opportunities in its core markets, especially in France, where the bank is launching a new retail bank called Ayvens, which will offer a range of banking and non-banking services to its customers.
"We are confident in our ability to deliver on our ambitions and to create value for our stakeholders," he said in a statement.