February 9, 2017 / 1:35 PM / 6 months ago

SocGen to list stake in vehicle leasing business

Frederic Oudea, Chief Executive Officer of French bank Societe Generale, attends the presentation of the company's 2016 annual results in Paris, France, February 9, 2017.Benoit Tessier

PARIS (Reuters) - Societe Generale (SOGN.PA), France's second-biggest listed bank, is to float its vehicle leasing arm ALD towards the middle of this year, after reporting stronger than expected fourth-quarter results.

SocGen said it would retain a majority stake in ALD Automotive, which has 1.4 million vehicles and provides leasing services for companies.

Financial services to companies, which includes vehicle leasing, fleet management and equipment financing, has been one of SocGen's growth engines. Its revenue rose 23.4 percent in the fourth quarter to 454 million euros.

The bank has been under pressure to cut costs to cope with a fragile French economy, stricter regulations that have raised the cost of doing business as well as high-tech challenges to traditional banking models.

It has tried to focus on operations that generate more fees and consume less capital.

SocGen's revenues in the fourth quarter rose 1.3 percent to 6.13 billion euros (5 billion pounds), above the average of analysts' estimates of 5.99 billion.

"The results were a bit better than expected," Benoit de Broissia, analyst at French investment firm Keren Finance, said. "The cost of risk was better than expected, and their revenues at their French retail banking division was better than that of BNP Paribas."

Larger rival BNP Paribas (BNPP.PA) revealed earlier this week that its retail business in France had struggled.

The logo of the French bank Societe Generale is seen in front of the bank's headquarters building at La Defense business and financial district in Courbevoie near Paris, France, April 21, 2016.Gonzalo Fuentes/File Photo

SocGen's shares were up nearly 3 percent by 1225 GMT.

The bank has cut overheads at its French retail arm where net interest income fell more than 5 percent in 2016. It is investing to bolster online and mobile banking while cutting back-office centres. It closed 92 bank branches in 2016.

SocGen also reduced costs at its investment banking business, which enjoyed a trading surge in the second half of the year, although full-year revenues fell 2 percent.

Looking ahead, Chief Executive Frederic Oudea said political uncertainty, with elections in France and other European countries, could dent confidence.

He said companies could postpone investment. "This could result in a slightly less dynamic economy," he told reporters.

For the full year, SocGen reported a 1.3 percent revenue decline, weighed down by both investment banking and French retail, while the bank achieved a stronger performance in international retail markets, such as Russia and Romania.

For the fourth quarter, net income fell 40.5 percent to 390 million euros ($417 million). That beat the average analysts' estimate of 354 million in a Reuters poll.

The bank's return on equity - a measure of how well a bank uses shareholder money to generate profit – was 7.8 percent in 2016 versus 7 percent in 2015. That is below the 9 to 10 percent that analysts cite as needed.

Additional reporting by Sudip Kar-Gupta. Editing by John O'Donnell and Jane Merriman

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