November 6, 2017 / 5:37 PM / a year ago

Fitch: SocGen's 3Q17 Results Satisfactory Despite Trading Slump

(The following statement was released by the rating agency) LONDON, November 06 (Fitch) Societe Generale S.A.'s (SG; A/Stable/a) 3Q17 results were satisfactory, although revenue reflected low market volatility and client activity in capital markets, both across fixed income and equities, as well as persistent revenue pressure in French retail banking. This was partly offset by strong performance in international retail banking and insurance, Fitch Ratings says. Loan-loss provisions remained low and benefitted from loan-loss provision reversals in corporate banking and Romania. SG generated EUR1.5 billion in pre-tax profit in 3Q17, 22% lower yoy and adjusted for own credit and debt valuation adjustments, PEL/CEL (home loan purchase schemes) provisions, non-recurring gains on sale and a EUR88 million negative revenue impact from the adjustment of home-loan hedging costs in 3Q17. The results were also materially affected by a EUR300 million litigation charge, excluding which the bank would have generated a EUR1.8 billion pre-tax profit, 7% lower yoy on a comparable basis. In 3Q17, SG delivered a 6.6% return on equity excluding debt valuation adjustments, which was 310bp lower yoy, but in Fitch's view satisfactory given that it was significantly affected by higher litigation provisions. Low interest rates continued to affect net interest income in the bank's home loan business. French retail reported an 18% yoy fall in pre-tax profit (excluding PEL/CEL) to EUR446 million in 3Q17, reflecting pressure on revenue and a 2% increase in operating expenses, as the bank continued to invest in digitalisation while reducing branches. Higher-than-expected housing loan renegotiations and prepayments led the bank to book one-off negative revenue of EUR88 million related to its interest-rate hedges. SG guided that housing loan renegotiation rates had now normalised, at around 5% in 3Q17. We expect this to alleviate further pressure on net interest income, which is likely to reflect low margins. Housing loans grew moderately (2% higher yoy), but growth in loans to business customers, even excluding municipalities and local authorities, was below market growth. Higher fee income in the quarter only partly offset a 16% reduction in individual customers' net interest income. International Retail Banking and Financial Services (IBFS) performed strongly; pre-tax profit rose 14% yoy to EUR832 million and accounted for a high 49% of SG's operating divisions' pre-tax income in 3Q17. The improvement offset the decline in French retail banking's pre-tax profit and was sustained by sound revenue generation in international retail banking (3% higher yoy) and insurance (14% higher yoy). SG's international retail operations benefitted from strong macroeconomic environments, with strong GDP growth rates in the Czech Republic, Romania, and Russia, where inflation has stabilised. A pick-up in Russian retail loan growth underpinned a strong 16% yoy revenue increase at constant scope and exchange rates in the country, which generated EUR40 million in pre-tax profit compared with a EUR5 million pre-tax loss a year earlier. Higher life insurance assets under management and solid premium growth underpinned a 15% pre-tax profit increase in insurance. SG's Global Banking and Investor Solutions (GBIS) business saw a sharp 38% yoy pre-tax profit decline to EUR396 million, reflecting industry-wide revenue pressure on sales and trading revenue due to low client activity and market volatility, compared to a more active 3Q16. Fixed-income sales and trading revenue fell by 28% yoy, in line with Global Trading and Universal Banking peers, but the 26% yoy decline in equities trading revenue was more pronounced than peers. The bank attributed the underperformance in equities to its bias towards flow derivative products, which more directly depend on market activity. Revenue in financing and advisory was broadly unchanged yoy, as higher revenue, notably from securitisation and leveraged finance, offset a challenging quarter for natural resources. Pre-tax profit in wealth and asset management fell by 70% yoy to only EUR8 million, partly reflecting a 12% revenue decline and despite positive net new asset growth. SG's fully-loaded Basel III CET1 ratio remained unchanged at 11.7% at end-3Q17, as retained earnings net of dividend accrual were broadly offset by slightly higher risk-weighted assets and other effects. The fully-loaded Basel III Tier 1 leverage ratio edged up by 10bp qoq to 4.3%, primarily on seasonally lower leverage exposure. SG already complies with its 2019 total loss-absorbing capacity requirement of 19.5%, including the inclusion of up to 2.5% of RWAs in senior preferred debt. The bank disclosed that it expects a resolution of two of its most relevant litigation cases in the US, on interbank offered rates and the Libyan Investment Authority, could be possible within the next few weeks or months. Provisions for litigation and similar matters stood at EUR2.2 billion at end-3Q17. Contact: Christian Scarafia Senior Director +44 20 3530 1012 Fitch Ratings Limited 30 North Colonnade London E14 5GN Luis Garrido, CFA Associate Director +44 20 3530 1631 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email:; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below