Societe Generale Q3 results reveal decreased profits, robust liquidity profile

Societe Generale (OTC:) reported a decrease in its third-quarter 2023 net profit to €295 million ($313.3 million) from €1.45 billion in the same period last year. The bank’s revenues also experienced a 6.2% drop to €6.2 billion. These reductions were primarily attributed to the impact of short-term hedges on net interest income from its French retail, private banking, and insurance sectors. Despite these decreases, the bank’s Q3 results surpassed FactSet analysts’ expectations.

The bank’s operating expenses rose by less than +1%, driven by goodwill impairment and a provision for Deferred Tax Assets. The increase in operating expenses was also influenced by the integration of LeasePlan’s activities and exceptional items worth €610 million.

Despite the drop in revenues, Societe Generale reported robust financial strength, marked by a common equity Tier 1 ratio of 13.3%, and a cost of risk standing at €316 million at the end of September. The bank’s liquidity profile remained strong with a Liquidity Coverage Ratio of 147% at the end of Q3 2023 and a stable deposit base compared to Q2 2023.

CEO Slawomir Krupa commented positively on the quarter’s performance, highlighting key milestones such as the completion of the LeasePlan acquisition by ALD, the 2022 share buy-backs, and commitment to decarbonization, aligning its financing with trajectories compatible with carbon neutrality objectives by 2050, as defined by the NZBA.

For the first nine months of 2023, Societe Generale reported revenues of €19.1 billion, a cost-to-income ratio of 72.4% (68.9% excluding Single Resolution Fund contribution), and Group net income of €2.1 billion. The Group also reduced its offshore exposure to Russia to around €1.0 billion of EAD (Exposure at Default) compared with €1.6 billion at 30 June 2023 (-38%).

A further decrease of over 20% is anticipated in the bank’s French retail, private banking, and insurance sectors in 2023, although the overall forecast for next year should match or exceed 2022 levels. The cost of risk for FY 2023 is estimated to be lower than 20 basis points, and provisions on performing loans amounted to €3,612 million at end-September 2023.

The bank’s board examined these results for Q3 and the first nine months of 2023 on November 2, 2023. A provision for distribution of €1.33 was made during this period.

InvestingPro Insights

In light of the recent financial performance of Societe Generale, InvestingPro provides some valuable insights. According to InvestingPro Tips, the bank boasts high earnings quality, with free cash flow exceeding net income. This strong earnings performance is expected to allow the management to continue dividend payments, which have been raised for three consecutive years. The bank is also trading at a low Price / Book multiple, indicating potential undervaluation.

InvestingPro’s real-time data further supports these findings. The bank’s market capitalization stands at $18724.67 million, with a P/E Ratio of 4.61, suggesting a low earnings multiple. The bank’s revenue for the last twelve months as of Q2 2023 was $24551.51 million, although it experienced a decrease of 16.05% during this period.

For those interested in exploring more about Societe Generale’s financial performance, InvestingPro offers 11 additional tips, providing a comprehensive understanding of the bank’s financial health and market position.

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