Societe Generale SA (GLE), France’s second-largest bank, reported fourth-quarter profit almost double analysts’ estimates, helped by earnings at its French and Russian consumer banking units. The shares surged.
Net income was 322 million euros ($439 million) compared with a loss of 471 million euros a year earlier, when Societe Generale wrote down a stake in a derivatives broker and booked charges for its own debt, the Paris-based company said in an e-mailed statement. The profit was more than the 163 million-euro average of nine analysts surveyed by Bloomberg.
Societe Generale’s earnings show its “robustness” and the bank is “in a position, in 2014 and beyond, to seize growth opportunities,” Chief Executive Officer Frederic Oudea, 50, said in the statement. The bank said it will pay investors a dividend from 2013 earnings of 1 euro a share, more than twice the previous year’s payout.
Europe’s economy is emerging from a record-long recession, boosting Societe Generale’s earnings from consumer banking. The lender’s revenue rose in France and Russia, helped by deposit inflows, while it also achieved more than one-third of its 900 million-euro total annual cost cuts planned by 2015.
The bank’s shares climbed as much as 3.9 percent in Paris trading, the biggest advance in more than a month. They rose 3 percent to 45.58 euros at 9:22 a.m., extending gains over the past 12 months to 40 percent and valuing the company at 36.4 billion euros. Over the same period, BNP Paribas SA (BNP), France’s largest bank, increased 32 percent and the Bloomberg Europe Banks & Financial Services Index climbed 13 percent.
“They are in a favorable position to grow and to reward shareholders,” said Alex Koagne, a Paris-based analyst at Natixis SA, who has a buy rating on the stock. “The dividend is really good news, and the revenue in the French retail banking unit behaved well.”
Societe Generale said it fully repaid three-year loans from the European Central Bank known as Longer-Term Refinancing Operations.
Consumer-banking earnings rose 11 percent in the fourth quarter from a year earlier, Societe Generale said in the statement. Net income at the French consumer banking unit increased to 281 million euros from 254 million euros. In Russia, the company’s largest market by clients outside of France, consumer-banking profit climbed to 69 million euros from 61 million euros in the fourth quarter of 2012.
Societe Generale’s operations in emerging markets such as Russia and Central Europe carry “low” risk, Deputy CEO Severin Cabannes said in an interview with Bloomberg Television. Market volatility since the Federal Reserve’s tapering “has been well managed and our situation is rather good,” he said.
The corporate and investment banking unit had a 29 million-euro loss compared with a 245 million-euro profit a year earlier. Earnings were hit by a 446 million-euro antitrust fine from the European Union, the company said.
In December, the European Commission, the EU’s executive arm, fined six companies a record 1.7 billion euros for allegedly rigging interest rates. Societe Generale’s fine was the second-largest after Deutsche Bank AG’s 725 million euros. The bank has blamed a single ex-trader it didn’t identify for attempting to rig rates between March 2006 and May 2008.
Deutsche Bank, Germany’s largest bank, posted a fourth-quarter loss on legal costs and accounting charges. Credit Suisse Group AG, the second-biggest Swiss bank, had a fourth-quarter profit that missed analysts’ estimates after setting aside 514 million Swiss francs ($572 million) for U.S. tax and mortgage litigation.
Societe Generale reported the Euribor fine as an expense. Provisions for litigation remained at 700 million euros at the end of the year from three months earlier, it said in the statement.
The core Tier 1 capital ratio under Basel III rules rose to 10 percent at year-end from 9.9 percent in September, it said.
Revenue at Societe Generale’s global-markets business was 1.04 billion euros in the fourth quarter, rising from 977 million euros a year earlier, it said. Sales from fixed-income, currencies and commodities trading fell 39 percent in the quarter while equities trading revenue rose 93 percent to 646 million euros.
The five biggest U.S. investment banks saw their total revenue from trading fixed income, currencies and commodities, a mainstay of their business, drop 4.2 percent in the fourth quarter to $10.2 billion, data compiled by Bloomberg Industries show. At Deutsche Bank, sales from investment banking and trading fell 27 percent, led by a 31 percent drop in debt-trading income, the Frankfurt-based company said last month.
Societe Generale, which plans to outline its financial goals at an investor meeting in May, has said it will reinforce its fixed-income activities by gaining full control of broker Newedge Group.
Societe Generale and Credit Agricole SA (ACA), France’s third-largest bank by market value, said in November they’re in talks to swap stakes in Newedge and asset manager Amundi Group. Credit Agricole would increase its stake in Amundi to 80 percent from 75 percent, while Societe Generale would gain ownership of Newedge.
The firm’s full-year net income almost tripled to 2.18 billion euros.
Societe Generale confirmed it targets a total return-on-equity, a measure of profitability, of about 10 percent by the end of 2015 compared with 8.4 percent last year, excluding exceptional gains and charges.