Societe Generale’s Financial Performance

Societe Generale, a leading French bank, has reported a return to profit in the second quarter of this year. The bank’s net income reached 900 million euros ($983.6 million), surpassing analysts’ expectations and significantly improving from the 1.5 billion euro loss recorded in the same period last year when the bank exited the Russian market.

The bank’s performance was supported by lower provisions for failed loans, resulting in a cost of risk of 12 basis points or 166 million euros.

Challenges in French Retail Banking and Global Banking Division

However, Societe Generale faced challenges in its French retail banking division, with revenues dropping by 13.6% compared to the previous year. This decline was primarily due to lower net interest margins, which are a key indicator of a bank’s profitability.

In the global banking division, revenues fell by 7.3% due to reduced volumes and weaker volatility. Specifically, fixed income and currencies (FIC) activities declined by 18.4% due to less favorable market conditions resulting from weaker interest rate and currency volatility.

Share Buyback Program and CEO’s Statement

Societe Generale also announced a share buyback program worth approximately 440 million euros, following the trend set by other banks this quarter.

The bank’s CEO, Slawomir Krupa, commented on the quarter’s performance, stating, “During the quarter, commercial activity was strong in most businesses. However, group revenues were impacted by the decline in net interest margins in France and lower market activities’ revenues as the market gradually normalized after a particularly favorable period.”

Krupa added, “The low cost of risk reflects the high quality of our loan portfolio and origination.”

Other Highlights for the Quarter

• Revenues (or net banking income) declined by 8.9% year-on-year to 6.3 billion euros.
• Operating expenses increased by 2.7% year-on-year to 4.4 billion euros.
• CET 1 ratio, a measure of bank solvency, stood at 13.1%.
• ROTE (return on tangible equity) improved to 5.6% from -13.7% compared to the previous year.