SocGen's shares drop on renewed cuts to French retail targets
Q2 net income beat estimates
Q2 French NII up 10.6% from year earlier
Full-year French NII to fall short of target
Shares fall at opening
Sees CET1 ratio above 13% at end of 2024
Recasts with share price, adds analyst quote
By Mathieu Rosemain
PARIS, Aug 1 (Reuters) -Societe Generale SOGN.PA beat second-quarter earnings estimates on Thursday thanks to a strong equities business but cut a key target for its French retail activities, sending its shares tumbling.
France's third-biggest listed bank by market value said second-quarter group net income jumped by 24% from a year earlier to 1.11 billion euros ($1.20 billion), beating the 973 million-euro median average of 16 analyst estimates compiled by the company.
Yet SocGen cut its full-year guidance for French retail divison's net interest income - the difference between what banks earn on loans and what they pay out for deposits - expecting it to be around 3.8 billion euros in 2024 compared to a previous target of at least around 4.1 billion euros.
The bank's shares were down 6.5% at 0709 GMT.
Its net interest income grew by 10.6% in the second quarter.
"Performance and another downward revision in French retail banking NII are disappointing although not totally unexpected," Royal Bank of Canada said in a note to clients.
Group revenues over the period grew by 6.3% to 6.69 billion euros, above the 6.59 billion-euro median average forecast. A 24% jump in sales from trading in equities helped drive SocGen's results, with the French bank outperforming Wall Street rivals in the field.
SocGen's performance, however, was below that of French bigger rival BNP Paribas BNPP.PA, which posted a 57% sales growth of its equities business.
SocGen's boss Slawomir Krupa has been striving to bolster the lender's underperforming stock price by delivering on a set of conservative growth and profitability targets that spooked investors last year.
SocGen said an increased share in deposits on regulated savings accounts, whose remuneration rate is set by the government, and a competitive environment, as a well subdued loan growth, weighed on the indicator and explain the 300 million-euro net interest income miss.
The target miss comes after a miscalculated and costly hedging policy aimed at protecting the bank against low interest rates that rolled off in the second quarter.
'TIGHT SHIP'
Krupa promised a year ago to run a "tight ship" in terms of portfolio of assets, which translated into a significant retreat from Africa and the disposal of its equipment finance division SGEF to French banking group BPCE.
Those moves, aimed at beefing up the bank's capital, boosted the group's yearly targets for CET1 - a key measure for financial strength.
SocGen said it now sees it above 13% this year, compared with a previous target of around 13%.
SocGen's share price has not improved since the start of the year while the STOXX Europe 600 Banks index .SX7P rose by more than 21%.
SocGen now trades at less than 30% its book value, with the French bank suffering more than its French competitors from the uncertainties created by the snap parliamentary elections in the country.
This price-to-book valuation puts it almost on par with Raiffeisen Bank International RBIV.VI, the Austrian bank that has been under pressure from authorities on both sides of the Atlantic to reduce its large footprint in Russia following the invasion of Ukraine.
By contrast, France's bigger rival BNP Paribas BNPP.PA trades at almost 60% its book value and Italy's UniCredit and Spain's BBVA BBVA.MC at more than 100%.
($1 = 0.9240 euros)
Reporting by Mathieu Rosemain;
Editing by Anousha Sakoui and Tomasz Janowski
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