Societe Generale (OTC:SCGLY) SA, under the leadership of CEO Slawomir Krupa, hinted at potential unit sales during an Investor Day held on Monday. The move is part of a new strategy, though the specifics were withheld due to past unfavorable deals. Units that will be retained must meet criteria such as an appropriate risk profile, synergy potential, and consistent profitability.
The Equipment Finance unit (SGEF), supervised by Odile de Saivre, is one of the units speculated for sale. Lazard (NYSE:LAZ) has been brought on board to advise on this potential deal. This development comes in the wake of the bank's recent sale of its Nordic region business to Nordea Bank Abp (OTC:NRDBY).
Another potential sale could be Societe Generale Securities Services (SGSS), which manages €4.7 trillion of assets under custody. Despite this impressive figure, it is considered small compared to BNP Paribas (OTC:BNPQY) Securities Services' €12 trillion. Its deep integration with the bank could pose challenges for a separation.
In line with its strategy to reduce its Africa footprint, SocGen may also sell its 52% stake in Tunisia's Union Internationale de Banques (UIB). This follows earlier sales in Congo, Equatorial Guinea, Mauritania, and Chad due to profitability not covering the implicit cost of equity.
According to InvestingPro data, Societe Generale has a market capitalization of 18759.2M USD and a P/E ratio of 4.69. Its revenue for LTM2023.Q2 stood at 24551.51M USD, reflecting a -16.05% growth rate. The bank's operating income for the same period was 7732.43M USD.
InvestingPro Tips indicate that Societe Generale has high earnings quality, with free cash flow exceeding net income. This strong earnings situation should allow the management to continue dividend payments. The bank has raised its dividend for 3 consecutive years and is expected to see growth in net income this year. Despite the recent decline in revenue, Societe Generale remains a prominent player in the banking industry.
CEO Krupa suggested a careful evaluation of each country where SocGen operates considering profitability and geopolitical risks. He insisted that local subsidiaries should consistently exceed their cost of equity in profitability. Disposals might be implemented to improve performance.
Despite these potential sales, certain units are unlikely to be sold due to promising long-term profitability prospects. These include the digital consumer bank Boursorama and car leasing unit Ayvens (formerly ALD), which are expected to receive additional capital investment.
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