• August 03, 2016
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Societe Generale announces its 2016 Q2 results

Q2 16: SOUND RESULTS IN A CHALLENGING ENVIRONMENT

• Net banking income excluding non-economic items of EUR 7.2bn (vs. EUR 6.5bn in Q2 15), +11.5%*, including the capital gain on the Visa disposal (EUR 725m). Good commercial performance by the businesses.
• Stable operating expenses vs. Q2 15
• Continued decline in the cost of risk (commercial cost of risk(1) of 38 basis points in Q2 16 vs. 44 basis points in Q2 15)
• Book Group net income of EUR 1,461m in Q2 16 vs. EUR 1,351m in Q2 15. Group net income excluding non-economic items: EUR 1,599m in Q2 16 (+44.6% vs. Q2 15)
• Good capital generation: fully-loaded CET 1 ratio of 11.1% (10.9% at end-2015). Total capital ratio of 16.7% (16.3% at end-2015)

H1 16: GOOD HALF-YEAR RESULTS

• Net banking income excluding non-economic items of EUR 13.2bn (vs. EUR 12.8bn in H1 15)
• Stable operating expenses excluding the effect of the Euribor fine refund and restated for IFRIC 21
• Net cost of risk down -11.1% vs. H1 15
• Group net income: EUR 2,385m in H1 16 vs. EUR 2,219m in H1 15
• Group net income excluding non-economic items**: EUR 2,428m (+25.5%* vs. H1 15)
• EPS: EUR 2.77 in H1 16 vs. EUR 2.22 in H1 15 (+25%)(2).

Societe Generale’s Board of Directors met on August 2nd, 2016 under the chairmanship of Lorenzo Bini Smaghi and examined the results for H1 and Q2 2016.

Book Group net income amounted to EUR 1,461 million in Q2 16, vs. EUR 1,351 million in 2015, due to the increased earnings of International Retail Banking & Financial Services as well as the recording of the capital gain on the disposal of Visa Inc. shares (EUR 662 million after tax in the Corporate Centre’s results). International Retail Banking & Financial Services’ earnings rose by nearly 36%, with an increase in all activities. Earnings were resilient in French Retail Banking (-5.2% vs. Q2 15) in a very unfavourable interest rate environment. Global Banking & Investor Solutions’ contribution was lower compared with an exceptionally high level in Q2 15, at EUR 448 million, its best level since Q2 15 in a still uncertain environment (EUR 702 million in Q2 15). Group net income totalled EUR 2,385 million in H1 16, vs. EUR 2,219 million in H1 15. If non-economic items are stripped out, it amounted to EUR 2,428 million (vs. EUR 1,970 million in H1 15). In a challenging economic environment for banking activities, marked by a low interest rate environment and unstable markets, the Group benefited from its well-balanced diversified banking model, with a substantially higher contribution from Retail Banking in H1.

Net banking income totalled EUR 6,984 million in Q2 16 (+3.0%* vs. Q2 15). If non-economic items are stripped out, it amounted to EUR 7,195 million (+11.5%* vs. Q2 15), including notably the capital gain on the Visa disposal (EUR 725 million). The Group’s net banking income came to EUR 13,159 million in H1 16 vs. EUR 13,222 million in H1 15, up 0.7%* when adjusted for changes in Group structure and at constant exchange rates. If non-economic items are stripped out, the increase is +4.3%*, at EUR 13,225 million vs. EUR 12,843 million in 2015.

The Group continued with its efforts to control operating expenses. They came to EUR 4,119 million in Q2 16, stable vs. Q2 15. Operating expenses totalled EUR -8,403 million in H1 16 vs. EUR -8,566 million in 2015. Excluding the Euribor fine refund and adjusted for IFRIC 21, operating expenses were stable in H1 16 vs. the same period in 2015.

The Group’s commercial cost of risk continued to decline, to 42 basis points in H1 16 (vs. 49 basis points in H1 15), towards the bottom end of the range announced by the Group at the beginning of the year, and to 38 basis points in Q2 16, down -6 basis points vs. Q2 15. The net cost of risk amounted to EUR -1,188 million in H1 16 (EUR -1,337 million in H1 15). During Q2, the Group recorded an additional EUR -200 million provision for litigation issues, as in Q2 15. The total net cost of risk in Q2 16 was EUR -664 million vs. EUR -724 million in Q2 15.

The “Basel 3” Common Equity Tier 1 (fully-loaded CET1) ratio stood at 11.1% (10.9% at end-2015). Q2 capital generation helped finance the Group’s targeted acquisitions (car fleet management group Parcours in France as well as the Private Banking activities of Kleinwort Benson in the United Kingdom), and the increase in the Group’s risk-weighted assets. The total capital ratio amounted to 16.7% at end-June 2016 (vs. 16.3% at end-2015).

Commenting on the Group’s results for H1 2016, Frédéric Oudéa – Chief Executive Officer – stated:

“Societe Generale posted sound results in the second quarter due to the good commercial and financial performance of all the Group’s businesses. Accordingly, the Group generated EUR 2,385 million of Group net income in the first six months of 2016, substantially higher than in H1 2015. These results, which have been achieved in a challenging environment, reflect the dynamism and strength of the Group’s well-balanced banking model, the quality of its portfolios and the commitment of its teams in serving its customers. Societe Generale is determinedly pursuing the far-reaching transformation of its business model in order to adapt it to the changing needs of its customers and the new regulatory environment, with the aim of further developing synergies, increasing operating efficiency and boosting its profitability.”

Re-disseminated by The Asian Banker