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SocGen has released results that put its operating performance 15% higher than expected. While the bank’s French networks look lacklustre, there has been no uncontrolled increase in the cost of risk. The excellent equities franchise within the group’s investment banking business did its job to perfection in Q1, placing SocGen in the top tier. However, alongside these results, management has announced €900m in cost savings and an ROE target of 10% by end 2015. The share is trading at an excessive discount: PLUS rating reiterated.
Results reported by SocGen were in line with expectations, both the headline figures and on a recurring underlying basis. The one sour note was the profit mix. Disappointment with the rising cost of risk in retail banking in France was not offset in investors’ eyes by robust results from investment banking. In parallel, deleveraging continued in Q4, bolstering, as a knock-on effect, the equity capital of this now solid, but still heavily discount-valued, group. PLUS rating reiterated.
SocGen has announced Q3 results nominally below the consensus, though marked by exceptional items without which operating profit would have come out well above expectations. At the same time, the group has considerably lowered its risk profile and improved its solvency. The valuation discount linked to the risk of a rights issue is gradually moving from being unjustified to being absurd. PLUS rating reiterated.
SocGen posted Q2 results which at first sight fell short of consensus. However, excluding exceptional items, the operating result is in line with expectations. Management surprised the market with its very good cost control and substantial capital generation. This is particularly reassuring in the current environment because widespread deleveraging makes a good price for asset disposals hard to achieve. PLUS rating confirmed.
SocGen has today published results that are 22% higher than expected. Even if one considers that FICC trading income of €1 billion is not something that can be repeated every quarter, it has at least come out in line. The group has also provided credible and reassuring data on its medium-term solvency targets and its liquidity position, which is showing a marked improvement. The share’s reaction in the early afternoon is inexplicable on the basis of these results, especially at 0.32x 2012e book value. PLUS rating confirmed.
The group has a diversified range of activities, including a good quality retail bank in France with the benefit of sustainable growth (+4-5% loan growth). The bank is also exposed to the superior growth of the CEE markets, Russia and the Mediterranean countries. The investment banking arm, which is a world leader in equity derivatives, has launched a radical overhaul designed to reduce risk. By abandoning some activities which require a funding commitment and through asset disposals, the group should be able to achieve its solvency objective (Tier 1 Basel III of 9% by the end of 2013) without having to raise new capital.
Results fell short of expectations, even excluding one-off items. However, they do reflect the management’s desire and ability to clean up its balance sheet. The group’s solvency and liquidity are increasing rapidly. To such an extent that the share is still trading at a steep discount on the 2012e book value, despite a 31% rise since the start of the year. PLUS code confirmed.
SocGen is a diversified bank. Retail banking in France contributes stable and sustainable results while international networks provide growth. Linked to the capital markets, a drastic downsizing of CIB activity is well underway. For the time being, the market seems to have no faith in the management’s ability to re-structure the group, despite the real progress already made. The 45-50% discount based on 2012e multiples is excessive.
SocGen’s Q3 net profit fell slightly short of expectations at €574 million, excluding one-off items. However, it remains well into positive territory despite a particularly difficult environment for the sector. But this publication is reassuring, perhaps even impressive, because it demonstrates the management’s ability to clean up and reduce its balance sheet in the space of just one quarter. The market had not given the group any credit for this achievement. Today’s rise is just a first step towards reducing the 40% discount on the 2012e book value. PLUS code confirmed.
The group’s Q2 results are disappointing although its fundamentals continue to improve. In fact, disregarding the impact of the Greek Sovereign debt, the operating result was 12% higher than last year and solvency has been greatly strengthened (+50 bps capital in Q2), despite a difficult environment. This publication is not the boost we were hoping for. Trading at a 42% discount on the basis of 2012e results, the valuation does, however, suggest a much worse situation than is the case in reality. PLUS code confirmed in the medium term.
SocGen has successfully launched its restructuring process with a gradual but real reduction of its portfolio of assets at risk and cost-cutting measures. The group’s exposure to Greece (€2.4 billion worth of sovereign debt and loans totalling €3 billion) will not break the bank, even in a default situation. Finally, even if the management only achieves 90% of its €6 billion net result target in 2012, the group is still trading at an unjustified 30% discount.
First quarter results posted by SocGen fell short of expectations, at €916 million against the expected €1 billion. However, they were penalised by non-recurring book items without which the net result would have emerged at €1.16 billion, up 10% year on year. The two key divisions, investment banking and retail banking in France, reported good results and the group’s fundamentals continue to improve. The 31% share discount on the basis of 2011e earnings does not take this into account. PLUS code confirmed.
SocGen’s Q4 results are not the best the group has published recently, but they do confirm its return to strength. Apart from a slight disappointment on the investment banking side which is volatile by nature, the international retail banking activities (including Russia) are ideally positioned to become a powerful growth driver again in 2011. In our opinion, the 33% valuation discount is increasingly unjustified. PLUS code maintained.
In recent weeks, the SocGen share has tracked macroeconomic news on sovereign debt. In the longer-term perspective, after three successive robust earnings announcements, the operational recovery of the bank has been confirmed. The 20% valuation discount on the sector is therefore unjustified in our view, especially as the Group achieved its €3 billion annual profit target for 2010 in just 9 months. PLUS code confirmed.
The SocGen share has been under some pressure in recent weeks, affected by rumours of a capital increase and trading losses. The publication of these very solid Q3 results, accompanied by detailed information about the impact of new regulations on shareholders’ equity is very reassuring. The 25% valuation discount against the sector now seems unjustified, especially as the group has taken just nine months to reach its annual profit target of €3 billion for 2010. PLUS code confirmed.
Following the 50% price increase over the past two months and the BNP results announced on Monday, which placed the bar rather high, the market was expecting SocGen to publish strong results. The net profit came in 50% ahead of expectations at €1.1 billion and was of very good quality. The business dynamic is surprisingly strong, with revenues up 13% year on year while the quality of the assets is no longer a burden on the group which already achieved 70% of its 2010 annual profit target in H1.
During Investor Day held on 15th June, the management reassured the market over its exposure to risk y assets (including Greece) and confirmed the group’s robust growth relays. The €3 billion net profit for 2010 has been validated with reassuring ease and the advanced targets for 2012 were described in great detail, showing Société Générale’s confidence in its ability to achieve them. PLUS code confirmed on a share whose price discount is overdone.
SocGen’s Q1 2010 results are once more in line with the quality of the bank’s activity. The management has reported a net result of just over €1 billion, 73% above expectations. Even allowing for the positive exceptional items, the quality of the results is reassuring. The investment banking arm performed well and the more traditional retail banking activities proved particularly robust. The 25% discount on the share price against the background of the Greek crisis is overdone. PLUS code confirmed.
SocGen’s Q4 2009 results were disappointing, especially after those announced by BNP Paribas yesterday. But, by the management’s own admission, 2009 was a transitional year which paved the way for recovery in 2010. The bank’s restructuring story has real potential. But focusing on that aspect alone would be to disregard the bank’s strong assets in its key divisions. Priced at 0.74x shareholders’ equity, the market is still focusing on the group’s negative points for the time being. PLUS code confirmed.
SocGen is going from strength to strength. Restructuring is continuing with costs well under control, a €1 billion cost-cutting target for 2010 and a balance sheet on which the risk is progressively and surely diminishing. The group’s franchise is therefore strengthening on a restructured base. It is able to report market share gains in its main business areas. PLUS code easily confirmed.
SocGen reported very convincing 3rd quarter figures. The Group has proved its ability to deliver on the main undertakings which it gave at the outbreak of the crisis. Restructuring is continuing with spending well under control and balance sheet risk diminishing steadily and substantially. The Group’s commercial business is therefore being strengthened on a restructured base with market share gains in the Group’s main activity areas. PLUS code strongly confirmed.
The management had pre-announced a small profit in Q2, which saw €1.3 billion in writedowns and a stable risk cost compared to Q1. The net profit in fact amounted to €309 million, despite €1.7 billion in writedowns, thanks to an improving risk cost. In other words, the results published by SocGen today are much better than expected. What is more, recurring revenues are 15% higher year on year, pointing to a strong commercial dynamic for the coming quarters. PLUS code easily confirmed.
The arrival of the new management at SocGen will enable the market to focus on the group’s fundamentals, which are favourable in the current market configuration. The very strong underlying result of the investment banking business in Q1 was an opportunity to further clean up the balance sheet. The group has a very strong position in equities and will benefit greatly from this asset. We are introducing this share with a PLUS code.
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