The Societe Generale banking group has just published lower annual results this morning. This is due to a significant drop in trading activities in the context of the Covid-19 pandemic, which has strongly affected the markets. Outlooks for the coming years were also published and nevertheless enabled the share price to remain in the green at the beginning of the session.
Societe Generale published this morning a 64.7% decline in underlying Group net income to EUR 1.43 billion. However, CET1's solvency ratio remains satisfactory at 13.4% with nearly 440 basis points above the regulatory requirement.
In detail, the report shows a sharp decline in underlying operating expenses to 16.5 billion euros, a loss of 5.2% but in line with the annual target.
The cost of risk was maintained at 64 basis points with 1.4 billion euros of provisioning on outstandings, representing 41% of the total.
While these results may seem very disappointing, they were predictable in view of the health crisis that marked the world in 2020. NBI thus amounted to 22.11 billion euros, down 7.6% organically, despite a real improvement in the performance of the bank's three core businesses in the second quarter.
Following the publication of these results, Societe Generale also indicated an objective of a decline in its underlying operating expenses by 2023 and a reduction in the cost of risk by 2021. The CET1 solvency ratio is expected to remain well above 200 basis points above the regulatory requirement.
This CET1 ratio should therefore remain appreciable even after the entry into force of the regulations aimed at finalising the Basel III reform, which will have an impact of around 39 billion euros from 2023.
Finally, and with regard to the group's distribution policy for 2021, the Board of Directors confirmed the objective of a distribution rate of 50% of the underlying net income, group share, potentially including a share buyback component of up to 10% of income.
Investors seem to have taken on board the bank's engaging outlook this morning, as the Societe Generale share opened in the green for the eighth consecutive trading session. Indeed, the share gained 2.5% to €17.9.
Indeed, it should be noted that the Group recorded a net profit of EUR 470 million in Q4, whereas the consensus forecast was for a profit of EUR 323.9 million. The cost of risk for the same quarter was 689 million euros compared to an estimate of 954 million euros.