French retail woes drag on SocGen

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A lacklustre performance from its retail bank dragged on Société Générale’s revenues in the third quarter, highlighting the challenges new chief executive Slawomir Krupa faces as he tries to steer a reset at France’s third-largest lender.

A resilient performance at SocGen’s investment bank compared with several European peers offset some of the pain, providing one brighter spot for Krupa as he attempts a turnaround after years of restructurings.

The group’s overall revenue was down 6.2 per cent to €6.2bn in the quarter, falling short of the €6.3bn forecast by analysts. Net profit beat expectations, coming in at €295mn compared with the €168mn predicted. But that was a drop of nearly 80 per cent from a year earlier after a series of charges it had previously flagged, including on deferred tax assets. 

But SocGen’s retail business was the major drag. French banks have yet to profit to the same degree as their European peers from rising interest rates, due in part to a so-called usury rate that controls how quickly they can pass on those hikes to borrowers.

In addition, the payouts they have to make on some regulated savings accounts have risen, squeezing net interest income. SocGen also cited the impact of short-term hedging against low interest rates, which became an additional hit on lending income.

Net interest income in its French retail bank dropped 27 per cent in the quarter from a year earlier, when stripping out the impact of two regulated savings accounts. Net interest income in the French division would fall more than 20 per cent for 2023 as a whole, SocGen said.

The picture would improve in 2024, it said, when net interest income would be “at a higher level or equal to the 2022 amount.”

Krupa, a SocGen veteran who previously ran the investment bank, took the reins in May after Frédéric Oudéa’s 15-year stint in the top job. Krupa’s first strategy update in September, in which he cut the group’s profitability targets and forecast muted revenue growth for the next three years, sent shares down more than 10 per cent.

In recent years, SocGen has tried to rein in risk taking at the investment bank and reshape the unit after it was hit by losses in its core equities business during the Covid-19 pandemic.

In the third quarter of 2023, overall revenues in SocGen’s investment bank dipped 0.4 per cent from a year earlier, outshining many rivals. It outperformed France’s BNP Paribas and Deutsche Bank in fixed income trading, reporting a 4.6 per cent revenue drop for that division.