Q3 14: Solid results and balance sheet
- Net banking income**: EUR 5.9bn, -1.8% vs. Q3 13
- Good control of operating expenses: -0.4%* vs. Q3 13
- Sharp decline in the commercial cost of risk: 58 bp(1) vs. 69 bp(1) in Q3 13
- Businesses’ operating income up +9.4%*
- Substantial increase in Group net income to EUR 836m vs. EUR 534m in Q3 13
- Fully loaded Basel 3 CET1 ratio: 10.4%
- Leverage ratio: 3.8%, up +20 bp vs. Q2 14
9M 14: Increase in Group net income to EUR 2,181m (9M 13: EUR 1,853m)
- Net banking income up +4.2%* vs. 9M 13
- Lower operating expenses*: -0.7%* vs. 9M 13
- Sharp decline in the net cost of risk: -30.6%* vs. 9M 13
- EPS(2): EUR 2.42
The Board of Directors of Societe Generale met on November 5th, 2014 and examined the results for the third quarter and first nine months of 2014.
In Q3 2014, the Group pursued its strategy of transformation and adaptation to the new banking environment. As part of the implementation of the single supervisory mechanism in Europe at the beginning of November, the European Central Bank (ECB) and European Banking Authority (EBA) carried out a bank asset quality review and a stress test exercise. At the end of this unprecedented exercise in terms of its scale and severity, Societe Generale is able to confirm the quality of its balance sheet and the resilience of its diversified universal banking model. The conclusions of the ECB’s inspection work identified only “minor normative adjustments compared with the size of the bank” (less than 0.1% of its balance sheet). Moreover, their accounting impact is negligible and they had no effect on the Group’s ratios at September 30th, 2014.
In an environment of very low growth and historically low interest rates in the eurozone, the Group’s net banking income, excluding non-economic items, amounted to EUR 5,871 million, slightly lower than the previous year (-1.8% in Q3 2014, and -1.3% in the first nine months of the year, at EUR 17,616 million). Commercial activity remained buoyant in retail banking networks, with significant growth in deposits in all the networks, against the backdrop of still weak credit demand in Europe, and the rapid development of banking activities on the African continent. The Financial Services to Corporates business line provided further evidence of its growth. In a sluggish market environment during the summer, Global Banking & Investor Solutions demonstrated the resilience of its client-focused model, with a good performance by Financing & Advisory and Private Banking.
There was further confirmation of the rigorous control of operating expenses. They were down -0.4%* in Q3 2014 vs. the same period the previous year (-0.7%* in the first nine months), while the net cost of risk was significantly lower from one year to the next (-40.8%* in Q3 14 and -30.6%* in the first nine months), due primarily to the decline in the commercial cost of risk (which stood at 58 basis points in Q3 14 vs. 69 basis points in Q3 13). Moreover, no collective provision for litigation risks was booked in Q3.
Benefiting from the efforts made to control operating expenses and a contained net cost of risk, Group net income amounted to EUR 836 million in Q3 14 (vs. EUR 534 million in Q3 13). Excluding non-economic items, it totalled EUR 838 million in Q3 14 (vs. EUR 758 million in Q3 13, +10.5%). It was lower in the first nine months of 2014 vs. the same period in 2013 (-11.0% excluding non-economic items) primarily following the goodwill write-down of the Group’s activities in Russia amounting to EUR -525 million in Q1 2014.
These results have bolstered the Common Equity Tier 1 ratio which stood at 10.4% at en - September 2014 (fully loaded), with a LCR ratio still above 100%, according to CRR/CRD4 rules, and a leverage ratio up +20 basis points at 3.8% in Q3 14.
Commenting on the Group’s results at end-September 2014, Frédéric Oudéa – Chairman and CEO – stated:
“The Q3 14 results provide further confirmation of the commercial momentum of the Societe Generale Group’s businesses, a source of future revenue growth, and the solidity of financial performances, thanks to good control of operating expenses and the confirmed decline in the cost of risk despite a lacklustre economic environment. The results of the asset quality review and stress tests carried out by the ECB confirm that the transformation implemented over the last three years has paid off and that Societe Generale is able to finance its growth helped by a very solid balance sheet.”