Societe Generale Beats Profit Expectations in Q1 2024 Despite Challenges

Societe Generale reported better-than-expected Q1 2024 financial results, with net income of €680 million and stable quarterly revenues. The bank's solid performance was driven by cost-cutting efforts and strong performances in Global Banking and Investor Solutions, Private Banking, and International Retail Banking.

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Aqsa Younas Rana
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Societe Generale Beats Profit Expectations in Q1 2024 Despite Challenges

Societe Generale Beats Profit Expectations in Q1 2024 Despite Challenges

Societe Generale, one of France's largest banks, reported better-than-expected financial results for the first quarter of 2024. The bank posted a net income of €680 million ($729 million), surpassing analysts' estimates despite facing headwinds in its retail banking and fixed-income trading divisions. Quarterly revenues remained nearly stable at €6.6 billion, supported by strong performances in Global Banking and Investor Solutions, Private Banking, and International Retail Banking.

Why this matters: The performance of major banks like Societe Generale has a ripple effect on the entire economy, influencing investor confidence and potentially impacting the broader financial sector. The performance of major banks like Societe Generale has a ripple effect on the entire economy, influencing investor confidence and potentially impacting the broader financial sector. Societe Generale's ability to adapt and thrive will be closely watched by industry experts and policymakers alike, given the challenges the banking industry continues to face.

The bank's solid performance can be attributed to the cost-cutting efforts implemented by CEO Slawomir Krupa, who took the helm a year ago. The cost-to-income ratio stood at 74.9% in Q1 2024, with operating expenses down 1.5% compared to the same period last year. Transformation charges amounted to around €350 million. "We are progressing in the execution of our strategic plan," stated Krupa. The bank's statement read, "Our operating performance improved thanks to a strong contribution from Global Banking and Investor Solutions and solid revenues from International Retail Banking."

However, Societe Generale's retail banking and fixed-income trading divisions faced challenges during the quarter. The French retail banking unit saw revenue decline by 3.5%, with wrong-way hedges continuing to weigh on net interest income. Fixed-income trading revenue fell 17% from a year earlier, partly as a result of high activity in early 2023.

First quarter results showed that the bank's financing and advisory unit saw revenue gain 3.5% to €859 million in the period, driven by asset-backed finance and a rebound in debt issuance services. Mergers and acquisitions activity remained low, in line with the broader industry trend.

Societe Generale's capital and liquidity profile remained robust, with a Common Equity Tier 1 (CET 1) ratio of 13.2% at the end of Q1 2024, around 300 basis points above the regulatory requirement. The Liquidity Coverage Ratio stood at 159% at the end of the quarter. The bank also launched a €280 million share buy-back program following the Annual General Meeting (AGM).

As part of its strategic initiatives, Societe Generale has been streamlining its operations and improving efficiency. Agreements were reached for the disposals of Societe Generale Equipment Finance, Société Générale Marocaine de Banques, and La Marocaine Vie. The bank also launched Bernstein, a new leader in research and cash equities, offering clients a wide range of international services on the whole equity value chain.

Looking ahead, Societe Generale reiterated its targets to grow revenue by at least 5% and achieve profitability measured in return on tangible equity of more than 6% for the full year. CEO Slawomir Krupa expressed confidence in the bank's progress, stating,"These first positive results demonstrate the mobilisation of all the teams to shape a more synergetic and efficient model, a source of sustainable profitability. "As Societe Generale tackles the challenges in the banking sector while executing its strategic plan, its performance in the coming quarters will be closely watched by investors and investment experts alike.

Key Takeaways

  • Societe Generale reports Q1 2024 net income of €680m, beating estimates.
  • Cost-cutting efforts reduce operating expenses by 1.5% year-over-year.
  • Global Banking and Investor Solutions, Private Banking, and International Retail Banking drive revenue growth.
  • Retail banking and fixed-income trading divisions face challenges, with revenue declines.
  • Societe Generale reiterates full-year targets: 5% revenue growth and 6% return on tangible equity.