Understanding our first quarter 2019 results

Dear shareholder,

The performances this quarter illustrate the robustness of our diversified banking model, resolutely focused on supporting our customers, and confirm our ability to achieve our strategic and financial objectives.

First and foremost, we have significantly strengthened our capital. The measures presented at the time of the publication of the 2018 full-year results are starting to bear fruit. We continued to implement our asset disposal programme, with the finalisation of several disposals and the announcement of the sale of our SKB subsidiary in Slovenia. Moreover, the refocusing of market activities is well under way, with a decrease in the capital allocated to these activities. Overall, these measures resulted in a substantial increase in our capital ratio (CET1) at 11.7%(1), thereby strengthening our capability to achieve our 12% CET1 ratio target by 2020. This is a major milestone which should increase market confidence on this issue. 

At the same time, we are continuing to develop our growth initiatives.  This quarter, our revenues were driven primarily by the robust performance of International Retail Banking & Financial Services and the strong momentum in Financing & Advisory. 

French Retail Banking continued with its digital transformation and proved resilient, despite the ongoing unfavourable interest rate environment. 

As announced at the beginning of the year, Global Banking & Investor Solutions’ adaptation plan is under way, with the refocusing of Global Markets and a €500 million cost-cutting plan, in order to improve the profitability of these businesses. 

Our solid results are also based on the controlled development of our costs and good risk management, with few losses on our loans.

All these measures and the transformations implemented in the Group will enable us to improve our operational profile and our structural profitability.

Finally, we have reaffirmed our intention to engage in the positive transformations of our customers and our economies and in particular in the energy transition process. We were ranked 2^nd in renewable energy financing in the EMEA region in 2018(2).

At €57, net tangible asset value per share has increased and I am confident that the valuation of the Societe Generale share price will much better reflect the intrinsic value of our assets over the next few quarters.

I would remind you that the Board of Directors will submit the option of a dividend payment in shares in respect of the 2018 financial year to the vote of the General Meeting of Shareholders.

Once again, I would like to thank you for your loyalty and the trust you have placed in our Group.

Frédéric Oudéa,
Chief Executive Officer

(1) Taking into account the assumption of a 50% subscription rate for the option of a dividend payment in shares subject to approval by the Ordinary General Meeting on May 21st, 2019 and a pay-out ratio of 50% for Q1 19 earnings
(2) Dealogic ranking of Financial Advisers in renewable energy financing in the EMEA region in 2018

Q1 2019 results in brief

Q1 2019 revenues (€6.2 billion) were driven by the momentum in International Retail Banking & Financial Services and Financing & Advisory.

With revenues of €2.1 billion, up 6.8%* in Q1 2019, International Retail Banking & Financial Services confirmed its position as one of the Group’s growth drivers.
All the regions and businesses participated in this strong commercial momentum, with revenues increasing by respectively +7.9%* in Europe, +12.5%* in Russia and +6.7%* in Africa and also in International Retail Banking. Revenues were also higher in the Insurance businesses (+2.4%*) and Financial Services to Corporates (+4.6%*).

French Retail Banking generated net banking income of €1.9 billion in an ongoing low interest rate environment and delivered a resilient financial performance.
The three brands Societe Generale, Crédit du Nord and Boursorama pursued their commercial expansion, particularly with regard to their core customers. Accordingly, Boursorama gained 123,000 new clients and consolidated its position as the leading online bank in France, with 1.8 million clients at end-March (+30% year-on-year). At the same time, the Societe Generale and Crédit du Nord networks strengthened their franchises on the Group’s target customers. There was further growth in the number of mass affluent and wealthy clients (+3% vs. Q1 18). Societe Generale continued with the rollout of regional business centres, in order to increase its proximity with Business customers. Four new units were rolled out in Q1 19, taking the number of centres to nine at end-March. In the case of Professional customers, Societe Generale opened a new “Pro Corner” (espace pro). It had 118 “corners” dedicated to professionals in the branches, as at end-March 2019.

The revenues of Global Banking & Investor Solutions totalled €2.2 billion, up +1.1% (-1.8%*), driven by the good performance of Financing & Advisory.
Financing & Advisory revenues were 18.5% (16%*) higher, confirming the healthy commercial momentum observed for several quarters. In contrast, the revenues of Global Markets and Investor Services were down -7.2% (-10.7%*) in a still challenging market environment.
 

Operating expenses remained under control at €4.8 billion and the cost of risk remained low.

Operating expenses were very slightly higher in French Retail Banking (+0.4%) against the backdrop of the ongoing digital transformation and the development of growth drivers. Efforts to support growth in International Retail Banking & Financial Services resulted in a positive jaws effect between revenue growth and the increase in costs (+5.1%*). The 1.6%* decrease in operating expenses illustrates the rigorous control of costs in Global Banking & Investor Solutions.
At 21 basis points, the cost of risk remains low. The Group expects a cost of risk of between 25 and 30 basis points for full-year 2019.
There was a further decline in the gross doubtful outstandings ratio to 3.5% at end-March 2019 (vs. 4.2% at end-March 2018).
 

Group net income** totalled €1 billion and the Group’s return on tangible equity (ROTE) stood at 8.4%**.

(*) When adjusted for changes in Group structure and at constant exchange rates
(**) Underlying data