• Societe Generale : Fourth quarter and full year 2018 Results

    Source: Nasdaq GlobeNewswire / 07 Feb 2019 01:06:01   America/New_York

    Paris, February 7th 2019

    PRESS
    RELEASE
     
      
     
     
    FOURTH QUARTER AND FY 2018 RESULTS

     
     

    2018 ROTE(1)  OF 9.7% AND INCREASE IN GROUP NET INCOME. ADAPTATION OF THE EXECUTION AND FINANCIAL TARGETS OF THE 2020 STRATEGIC PLAN


    KEY FINANCIAL DATA

    • Revenues(1) up +0.6% in 2018 at EUR 25,205 million (EUR 5,927 million or -4.8% in Q4 18) due to the good performance of International Retail Banking & Financial Services, resilient French Retail Banking activities and the strong momentum in Financing & Advisory.
    • 2018 operating expenses(1): EUR 17,595 million (+2% vs. 2017); Q4 18: EUR 4,627million (+0.9% vs. Q4 17.
    • Still low cost of risk at 21 basis points in 2018, reflecting the quality of the loan portfolio.
    • 2018 Group book net income: EUR 3,864 million (+37.7% vs. 2017); Q4 18: EUR 624 million (EUR 69 million in Q4 17). Group ROTE(1) of 9.7% in 2018 (5.9% in Q4 18).
    • Continued refocusing of the business model on core regions and businesses (announced disposals representing an equivalent impact of +37 basis points on the CET1 ratio).
    • Group commitment to positive transformation initiatives recognised through further awards in 2018.
    • On the three main litigation issues, agreement reached with the US and French authorities.
    • Fully-loaded CET1 ratio: 10.9% (11.2%(2) with the effect of the option of a dividend payment in shares subject to approval by the Combined General Meeting on May 22nd, 2019).
    • 2018 Earnings Per Share: EUR 4.24 – Proposed dividend stable at EUR 2.20, with option of payment in shares.

    ADAPTATION OF THE EXECUTION AND FINANCIAL TARGETS OF THE “TRANSFORM TO GROW” PLAN

    • Confirmation of the long-term strategic focus: a diversified, more compact Group resolutely focused on its customers, delivering profitable and responsible growth.
    • Inclusion of the new interest rate scenario in the eurozone, with an impact of around EUR -500 million on Group revenues in 2020.

    The footnote * in this document corresponds to data adjusted for changes in Group structure and at constant exchange rates.

    1. Underlying data. See methodology note 5 for the transition from accounting data to underlying data.
    2. Taking into account the assumption of a 50% subscription rate for the dividend in shares.
    • Adaptation of the operational set-up in Global Markets resulting in a reduction in risk-weighted assets of around EUR 8 billion between now and 2020.
    • Additional plan to reduce costs by around EUR 500 million in 2020 in Global Banking & Investor Solutions.
    • Acceleration in the refocusing of the regional and business portfolio taking the disposal programme target to a positive effect of +80-90 basis points on the CET1 ratio by 2020 (the Group’s initial target being 50-60 basis points).

    The Group’s financial targets for 2020 are as follows:

    • Group ROTE([1]) of between 9%-10%
    • RONE(1) for French Retail Banking revised to 11.5%-12.5%
    • RONE(1) for International Retail Banking & Financial Services increased to 17.0%-18.0%
    • RONE(1) for Global Banking & Investor Solutions ranging from 11.5% to 12.5%
    • CET1 ratio of 12%
    • 50% payout ratio, with a dividend per share of at least EUR 2.20

                   

    Fréderic Oudéa, the Group’s Chief Executive Officer, commented:

    “After this first year in the execution of our 3-year plan, we have confirmed our long-term strategic ambition: delivering profitable and responsible growth thanks to a robust, diversified, more compact banking Group resolutely focused on its customers, in order to assist them in their positive transformation projects.
    We successfully achieved several major milestones in our transformation during 2018. The digital transformation process continued with success and there was considerable progress in the growth initiatives in French and International Retail Banking, as well as Financing & Advisory. However, market activities experienced a more mixed performance, below our expectations.
    In an economic, financial and regulatory environment that looks set to be less favourable and even more complex over the next few years than anticipated a year ago, we have decided to adapt the execution of our plan and our financial trajectory.
    Our first priority is, and will remain, to increase value for shareholders while consolidating our capital trajectory. We will be even more selective in our capital allocation, prioritising the Group’s areas of excellence. Moreover, in a more uncertain economic environment, we will continue to work on our operating efficiency with an additional plan to reduce costs in Global Banking & Investor Solutions and we are further prioritising cost control. All these measures and the Group’s transformation will enable us to improve our operational profile and pursue the improvement in the structural profitability of our businesses.”


    GROUP CONSOLIDATED RESULTS

    In EUR mQ4 18Q4 17Change2018 2017 Change
    Net banking income5,927 6,323 -6.3%-5.8%*25,205 23,954 +5.2%+6.4%*
    Underlying net banking income(1)5,927 6,228 -4.8%-4.4%*25,205 25,062 +0.6%+1.7%*
    Operating expenses(4,458)(5,024)-11.3%-11.1%*(17,931)(17,838)+0.5%+1.6%*
    Underlying operating expenses(1)(4,627)(4,586)+0.9%+1.2%*(17,595)(17,243)+2.0%+3.1%*
    Gross operating income1,469 1,299 +13.1%+15.0%*7,274 6,116 +18.9%+20.8%*
    Underlying gross operating income(1)1,300 1,642 -20.8%-20.1%*7,610 7,819 -2.7%-1.6%*
    Net cost of risk(363)(469)-22.6%-22.3%*(1,005)(1,349)-25.5%-23.4%*
    Underlying net cost of risk (1)(363)(269)+34.9%+35.8%*(1,005)(949)+5.9%+10.1%*
    Operating income1,106 830 +33.3%+36.9%*6,269 4,767 +31.5%+33.2%*
    Underlying operating income(1)937 1,373 -31.8%-31.2%*6,605 6,870 -3.9%-3.2%*
    Net profits or losses from other assets(169)(39)n/sn/s(208)278 n/sn/s
    Income tax(136)(558)-75.7%-76.0%*(1,561)(1,708)-8.6%-8.0%*
    Reported Group net income624 69 x 9,0x 15,53,864 2,806 +37.7%+42.7%*
    Underlying Group net income(1)744 877 -15.2%-13.8%*4,468 4,491 -0.5%+1.8%*
    ROE4.1%-0.4%  7.1%4.9%  
    ROTE6.5%-0.5%  8.8%5.7%  
    Underlying ROTE (1)5.9%7.4%  9.7%9.6%  
    1. Adjusted for non-economic items, exceptional items and linearisation of IFRIC 21

    Societe Generale’s Board of Directors, which met on February 6th, 2019 under the chairmanship of Lorenzo Bini Smaghi, examined the Societe Generale Group’s results for Q4 and approved the results for full-year 2018.
    The various restatements enabling the transition from underlying data to published data are presented in the methodology notes (section 10.5).

    Net banking income: EUR 5,927m (-6.3% vs. Q4 17), EUR 25,205m (+5.2% vs. 2017)

    Book net banking income totalled EUR 25,205 million in 2018, up 5.2% compared to 2017 (EUR 23,954 million).
    In 2017, net banking income included several exceptional items, i.e. the impact of the settlement agreement with the LIA (EUR -963 million) and the adjustment of hedging costs in French Retail Banking (EUR -88 million). When restated for these items and non-economic items, underlying net banking income came to EUR 25,062 million in 2017.
    Underlying net banking income grew by 0.6% in 2018.

    In 2018,

    • French Retail Banking’s net banking income, excluding PEL/CEL provision, declined -1.8% vs. 2017, in line with the Group’s expectations. French Retail Banking continued with its transformation and developed its growth drivers in an environment still characterised by low interest rates.
       
    • International Retail Banking & Financial Services’ revenues were significantly higher (+5.1%, +6.6%*), impacted by the robust commercial dynamism across all businesses and geographical regions. Accordingly, International Retail Banking revenues increased by +6.3% (+9.1%*), Insurance revenues