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Credit Agricole, SocGen results highlight mixed French fortunes

Published 02/08/2024, 12:31 AM
Updated 02/08/2024, 07:01 AM
© Reuters. FILE PHOTO: The logo of French bank Societe Generale is seen outside a bank building in Paris, France, February 5, 2024. REUTERS/Sarah Meyssonnier/File Photo

By Mathieu Rosemain

PARIS (Reuters) -French banks Credit Agricole (OTC:CRARY) and Societe Generale (OTC:SCGLY) posted mixed results on Thursday, putting pressure on their shares, after BNPP missed forecasts last week.

Banks in France have not benefited as much as euro zone rivals from high interest rates over the past few years because they tend to pay more interest to depositors which eats into their net interest income (NII).

Shares in Credit Agricole, France's second-largest lender, saw their biggest single-day slump since May last year, while those of SocGen, the country's third-biggest bank, were down around 1% at 1130 GMT after earlier falling as much as 5%.

SocGen's fourth quarter net income dropped sharply but beat analyst forecasts thanks to signs of recovery in its domestic retail business and stable investment bank trading revenue.

"The change in trajectory in French retail banking revenues is encouraging and it appears that SG is moving faster on its restructuring" Royal Bank of Canada analysts said in a note.

SocGen said its results capped a challenging year, marked by the costly acquisition of LeasePlan, a hedging policy against low rates at the retail unit that backfired when rates jumped, and a badly-received strategic plan.

Group net income in the final three months of 2023 tumbled nearly 60% from a year earlier to 430 million euros ($463 million), beating the 333 million-euro median average of 13 analyst estimates compiled by SocGen.

Credit Agricole's fourth-quarter profit, meanwhile, was slightly better than expected as corporate and retail banking activities offset a revenue fall at its insurance division. But net income fell 25% from a year before to 1.33 billion euros.

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The group's French retail banking net income rose by 4.2%, driven by an increase in net interest income, sales at its insurance business fell 47% due to high weather-related claims.

With a yearly net income of 6.35 billion euros, an annual return on tangible equity (ROTE) of 12.6% and cost-to-income ratio of 54.1% last year, Credit Agricole said it had fulfilled in 2023 its financial targets set for 2025.

'REBOUND'

SocGen has struggled recently, with its shares lagging rivals and analysts questioning its low profitability and reliance on volatile investment bank earnings.

The bank's 2024 guidance, which includes an annual sales growth target of at least 5%, was below expectations because of restructuring costs needed to deliver on its cost savings plan.

Chief Executive Slawomir Krupa in September unveiled a strategic plan that promised little in the way of revenue growth but pledged to slash costs and sell non-performing assets.

The bank has some way to hit its targets. Its return on tangible equity (ROTE), a measure of profitability, was 1.7% at end-2023, against Krupa's target for 2026 of 9% to 10%.

In a call with analysts, Krupa declined to update markets on the potential disposals SocGen could make but confirmed the bank was on track to finalise its planned joint venture with U.S. investment firm AllianceBernstein (NYSE:AB) in the first half of 2024.

"There are a lot of synergies there that could be done, mostly actually on the revenue side but also a few on costs," Krupa told analysts in a call.

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SocGen said the fourth quarter marked the "beginning of the rebound in net interest income", the difference between what banks make on loans and pay out on deposits.

The lender is also spending to acquire clients for its online BoursoBank, increasing the number by a record 566,000 in the fourth quarter of 2023 to reach 5.9 million.

($1 = 0.9284 euros)

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