Understanding our Annual Results 2017
Frédéric Oudéa's editorial
2017 was another important and positive milestone in Societe Generale group’s transformation: ongoing adaptation of the business model, strengthening of the businesses’ innovation capacity, definition of the new strategic plan “Transform to Grow”, implementation of a new more agile organisation. In addition to the impacts of a number of exceptional items, the 2017 financial results reflect the healthy commercial momentum of all our businesses, the disciplined management of our costs and risks, and the improvement in our underlying profitability.
2017 was another important and positive milestone in Societe Generale group’s transformation: ongoing adaptation of the business model, strengthening of the businesses’ capacity for innovation, definition of the new strategic plan “Transform to Grow” and implementation of a new, more agile organisation. In addition to the effects of a number of exceptional items, the 2017 financial results reflect the healthy commercial momentum of all our business lines, disciplined management of our costs and risks and the improvement in our underlying profitability.
When corrected for the effect of exceptional non-economic items, underlying Group Net Income stood at €4,491 million in 2017 (up +8.4% vs. 2016). These results reflect the good revenue performance by the business lines in a mixed environment (underlying Net Banking Income of €25,062 million in 2017, +0.5% vs. 2016), with a positive commercial momentum in French Retail Banking, the record contribution from International Retail Banking & Financial Services and a resilient performance from Global Banking & Investor Solutions. The Group also benefits from continued cost discipline across all its activities, while continuing to invest in its digital transformation and the growth of its businesses, and a very low net cost of risk confirming the quality of the asset portfolio.
Against a backdrop of low interest rates and the acceleration in the transformation of the French networks, French Retail Banking maintained a healthy commercial momentum and a satisfactory level of profitability. French Retail Banking’s three brands continued their commercial expansion,with the number of mass affluent and wealthy clients increasing by 4.7% in 2017 for the Societe Generale and Crédit du Nord networks. Additionally, Boursorama saw the number of its customers increase by 30% vs. 2016 to 1.3 million at the end of 2017, strengthening its position as the leading online bank in France. In parallel with the growth of the customer franchise, the Group promoted the development of growth drivers, the contribution of fee generating activities and, of course, continued to support its customers in financing their projects (average loan outstandings increased by 1.4% vs. 2016), while remaining selective in terms of origination in order to protect the level of margins and its risk appetite.
International Retail Banking & Financial Services continued to benefit from a good commercial momentum following the improvement in the macroeconomic environment and risk management efforts. International Retail Banking’s outstanding loans rose by 5.6% vs. 2016, with a particularly strong increase in Western Europe and Africa. The life insurance savings business saw outstandings increase by 2.3% in 2017, and by 16.1%, including Antarius’ life insurance outstandings. It also benefited from a stronger trend towards unit linked products. ALD Automotive, full service leasing and fleet management solutions, experienced another substantial increase in its vehicle fleet (up 9.8% in 2017), exceeding the threshold of 1.5 million vehicles, mainly through organic growth. The company continued to consolidate its leadership position in the mobility market. Finally, Equipment Finance’s outstanding loans were up 3.8% vs. 2016 in a highly competitive environment adversely affecting new business margins.
In a market characterised by historically low volatility, Global Banking & Investor Solutions managed to gain market share thanks to dynamic new client growth and substantial expertise, recognised by both clients and the industry. Revenues proved resilient, underpinned by the good momentum of certain franchises, in particular structured market products, Prime Services, Securities Services, Financing (particularly natural resources financing), Private Banking, structured products and Lyxor Asset Management activities. In addition, costs remained under control, with stable operating expenses reflecting efforts to control costs and improve operational efficiency, and with a very low net cost of risk.
Overall, taking into account exceptional items related in particular to decisions to adjust corporate tax rates in the United States and Europe, and the impact of litigation (the provision for disputes amounted €2.32 billion at the end of 2017, following an additional allocation of -€200 million in the fourth quarter of 2017), Societe Generale generated book Group Net Income of €2,806 million in 2017 compared with €3,874 million in 2016. The Group maintains a good level of capital (a CET1 ratio of 11.4%), which means it is compliant with all its prudential obligations.
Societe Generale’s Board of Directors has decided to propose a dividend payment of €2.20 per share (identical to the dividend paid in 2017) to the General Meeting on 23rd May, 2018.
We begin 2018 with confidence, sustained by the ambition to seize the growth opportunities of our activities, in an economic and financial environment that should gradually be more favourable. We will focus on the disciplined execution of the first year of our new strategic plan. With globally recognised expertise, the exceptional commitment of our teams and a solid balance sheet, we are resolutely aiming to be the trusted partner of our customers, committed to the positive transformation of our societies and economies.
Once again, I would like to thank you for your loyalty and the trust you have placed in our Group.
Chief Executive Officer
Michala Marcussen, Group Chief Economist and Head of Economic and Sector Research, discusses "The real side of financial markets". Monday 5 February saw the sharpest single day decline on global equity markets in more than half a decade. As is the case with all market movements, behind them we find a complex web of economic fundamentals, liquidity and technical factors.
With 75 million digital contacts every month in France, digital tools are becoming our customers' main point of entry to the Bank. With new technology, the ever-multiplying data is analysed in greater depth, enabling Societe Generale to offer customers more personalised and relevant services, by combining the best of human and digital resources. We are undergoing profound transformations to better develop and protect this strategic asset for the Group.
December 2017 marked two years since the Paris Agreement and the first One Planet Summit, presenting an opportunity for Societe Generale to announce a new stage in its commitments to the fight against climate change: contributing to raising €100 billion in financing for the energy transition by 2020, reducing the Group's carbon footprint and strengthening the Oil and Gas sectoral policy. The energy transition is a major collective issue, Societe Gneerale, one of the world leaders in energy financing, reaffirms with these strong new measures its commitment to the positive transformation of our economy.
Present on the African continent for over 100 years and benefiting from strong local knowledge, Societe Generale is a major player in the development of the African economy. Health has always been a primary concern of any population and remains a major challenge for developing countries today. Societe Generale was in Dakar alongside Amadou Ba, Minister of Economy, Finance and Planning of Senegal, for the signing of a financing contract of over €160 million for a project seeking to improve access to healthcare for Senegalese people through the construction of four hospitals. This project is an example of positive impact investment that the Group supports.
At the heart of an amateur rugby club
This five-episode series realised by Societe Generale introduces the viewer to the life of the SPRC, the amateur rugby club of Saint-Père-Marc-en-Poulet, a small rural village in northern Brittany. Three emblematic figures from the world of rugby - Jonny Wilkinson, Thierry Dusautoir and Sylvain Marconnet - arrive to coach the club’s players from both a rugby and a professional point of view. This series is a tribute to the values of rugby that encourage team spirit and develop character by helping the team find their path. Discover the rousing history of the club and the lives of its players.