SocGen profits slide as bank lifts bad loan provisions fivefold

Société Générale reported a 35 per cent drop in fourth-quarter profit on Wednesday, as the bank increased its provisions for bad loans fivefold in expectation of customers struggling to repay their debts.

Earnings at France’s third-biggest bank beat analysts’ expectations in the final three months of the year, but its net income fell from €1.8bn to €1.2bn compared with a year earlier after setting aside €413mn for bad loans.

SocGen said it planned to return €1.8bn to shareholders through a cash dividend of €1.70 a share and a €440mn buyback programme after enjoying a 9 per cent increase in net banking income over the year, helped by rising interest rates.

“2022 marked a decisive stage for the group, which was able to deliver record underlying performances while adapting itself swiftly and efficiently to an uncertain and complex environment,” said chief executive Frédéric Oudéa, who is due to step down from his role at the bank’s annual meeting in May.

SocGen’s revenues were also bolstered by strong performance in its financing and advisory business, its global markets arm and ALD, its auto-leasing subsidiary.

On Tuesday, ALD — which is finalising a deal to acquire rival LeasePlan — said Oudéa would be joining its board, a role he would continue after leaving the SocGen board in May.

RBC analyst Anke Reingen said that although SocGen had generated better than expected results in the fourth quarter, “the outlook is less positive with guidance of a worse cost income ratio for 2023 than we calculate consensus has factored in, a lower 2022 payout, and uncertainty on the capital-return policy going forward . . . partially offset by loan loss guidance that is better than consensus.”

French banks have not benefited from rising interest rates to the same degree as their European peers due to the popularity of a Napoleonic Wars-era savings product in the country whose rates are linked to inflation and set by the government.

Even so, Paris-based bank BNP Paribas said on Tuesday that it would return €5bn to shareholders in buybacks this year after producing record annual profits in 2022, despite its results disappointing in the final three months of the year.

SocGen’s shares are up 16 per cent this year, though down 20 per cent from a year earlier after its Russian subsidiary Rosbank was affected by the war in Ukraine. SocGen took a €3bn hit when it sold the business last year.

The shares were down 1.6 per cent in early trading on Wednesday.