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Societe Generale Chief Executive Slawomir Krupa cut his profit target and forecast slower growth at the French bank, unveiling what he called a “realistic outlook” after years of restructuring. “new plan.
In May this year, Société Générale changed its CEO for the first time in 15 years. After a strategic update, the bank’s share price fell more than 7% in early trading.
France’s third-largest bank by market value said it aims to increase return on tangible equity to 9% to 10% by 2026. The previous target was to increase returns to 10% by 2025.
It also plans to achieve average annual revenue growth of between 0% and 2% between 2022 and 2026, down from its previous target of 3% growth by 2025.
“This is a realistic path where promises don’t matter but our ability to deliver on them,” Krupa told reporters. “This is the right plan for the bank.”
Société Générale will tightly control capital, limiting the amount of money it allocates to its business lines, he added, outlining moves to save costs and simplify the bank’s structure.
The bank underwent multiple restructurings under former CEO Frédéric Oudéa, while its share price continues to lag peers since the 2008 rogue trading scandal and the global financial crisis.
“We believe this is a solid plan to initiate a re-rating of the stock,” said Citi analyst Azzurra Guelfi. However, Jefferies analyst Flora Bo According to Flora Bocahut, the update contains some unexpected negative impacts.
“Today’s targets indicate that revenue will grow by only 1% on average through 2026, well below our expectations,” Bocahut said.
Krupa said Societe Generale would try to downsize its operations and form strategic partnerships with other financial groups to lower its cost base, but gave no further details on which businesses could be sold or cut.
Krupa has established himself as a viable successor to Udiya after five years as head of the bank’s U.S. operations and has forged partnerships with major U.S. financial groups.
Last week, Societe Generale announced a 10 billion euro private credit fund in partnership with Brookfield Asset Management. The bank also has an equity joint venture with AllianceBernstein.
Krupa said on Monday that alliance deals were possible with Société Générale’s other business units. He added that the bank had to be “creative” in its search for growth as it became more conservative in allocating capital outside French online bank Boursorama and its car rental business.
The firm has reduced risk-taking in investment banking in recent years, and Krupa said he wants to strengthen the business’s deal advisory side.
Societe Generale also said on Monday that it aims to reduce its cost-to-income ratio below 60% by 2026, involving savings of 1.7 billion euros.
The company has set a target of controlling its Tier 1 capital ratio at 13% to comply with stricter regulatory requirements, and has set its dividend payout ratio this year at between 40% and 50% of profits, a lower target than at home. competitors.
Before Monday’s announcement, Société Générale’s shares had risen 9.4% this year, compared with a 12.2% gain across the European banking sector, although investors have speculated about the bank’s financial health since late March following the Credit Suisse bailout. Shares in Société Générale have risen 34%. .
Société Générale is one of Europe’s cheapest big banks, with a tangible-to-book value ratio of 0.3, less than half that of rival BNP Paribas.
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