August 2, 2018 / 4:39 AM / in 3 months

SocGen's profits rise, French retail bank weakness hits shares

PARIS (Reuters) - Societe Generale (SOGN.PA) on Thursday reported higher second-quarter profits, supported by its overseas businesses, but a sluggish performance at its retail bank in France weighed on its shares.

The logo of Societe Generale is pictured outside the headquarters of the French bank at the financial and business district of La Defense at Puteaux near Paris, outside Paris, France, May 16, 2018. REUTERS/Charles Platiau

The bank is in the middle of plans to sell businesses that lack scale, while also looking to make acquisitions that will strengthen its operations where it has a competitive edge.

The bank is selling its Albanian and Bulgarian banks, for example, to Hungarian rival OTP OTPB.BU, and also its private banking business in Belgium to ABN AMRO (ABNd.AS).

Last month, SocGen said it would buy Commerzbank’s (CBKG.DE) derivatives and asset management business.

Chief Executive Frederic Oudea said the strategy was beginning to pay off.

“The results demonstrate our choices of diversified and value-creating businesses let the group enter a dynamic of profitable and sustainable growth,” Oudea said in a statement.

Oudea expected more acquisition opportunities in corporate and investment banking in Europe as the market was fragmented.

“There are too many actors in Europe,” he said.

He also saw opportunities for SocGen’s car leasing and fleet management arm ALD (ALDA.PA).

In France, Oudea said low interest rates and a tepid economic recovery meant revenue stabilisation in French retail banking would be delayed for at least one year.

SocGen expects revenues at its French retail bank to shrink 1-2 percent for the 2018 full year. The bank had previously said it expected its retail bank in France would stabilize this year.

Analysts at brokerage Jefferies said SocGen’s results were starting to show positive results from the company’s general strategy plan, although weakness at its French retail banking division could weigh on SocGen’s shares.

The bank’s shares fell 2.3 percent.

Net profit rose 9.3 percent to 1.16 billion euros ($1.35 billion), as earnings from its overseas businesses offset the weak performance of its domestic retail bank.

Four analysts polled by Inquiry Financial consultancy on behalf of Reuters had expected profit of 1.15 billion euros.

The net profits included a 200 million euro provision set aside by the bank to pay potential settlements with U.S. authorities over possible sanctions violations and other legal disputes. The bank’s total provisions for dispute settlements are now worth 1.43 billion euros.

Group revenues rose 24 percent to 6.45 billion euros. The year-on-year increase also reflected the fact that second quarter results in 2017 were impacted by a 963 million euro settlement of a dispute with Libya’s sovereign wealth fund.

One bright spot was SocGen’s corporate and investment banking division, where revenues rose 0.5 percent, beating forecasts. Revenues at this business had fallen 13 percent in the first quarter.

SocGen’s revenue from its banks and other businesses abroad, such as ALDA or foreign insurance businesses, rose 5.4 percent to 2.08 billion, while revenue from its domestic retail bank fell 1.7 percent to 1.99 billion.

SocGen’s results followed those of its larger French rival BNP Paribas (BNPP.PA), which revealed this week that its overseas businesses had helped to offset a sharp fall in fixed income trading and weakness at its French unit.

Reporting by Inti Landauro; Editing by Sudip Kar-Gupta and Jane Merriman

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