SocGen's CEO Krupa tightens screws on costs as bank's turnaround plan falls flat
Removes reference to hedge fund in paragraph 20
SocGen's shares lag despite CEO Krupa's strategy
Analysts question SocGen's NII inflection point
Takeover speculation dismissed over low-margin French retail
By Mathieu Rosemain
PARIS, Sept 20 (Reuters) -Societe Generale's SOGN.PA CEO Slawomir Krupa is set to turn the screws further on costs as he presses ahead with a turnaround strategy announced a year ago that has so far failed to revive the French bank's flagging share price.
SocGen is one of Europe's cheapest listed banks, trading at less than 30% its book value despite plans to cut costs of 1.7 billion euros ($1.90 billion) by 2026 and more than 2.7 billion euros in asset sales
The sales include a stake in its business in Guinea, announced on Friday, as well as the sale of its professional equipment financing business in April which brought in $1.2 billion.
Now the bank is tightening budgets in all divisions and mid-tier managers are encouraged to go further than just meet their cost targets, a source familiar with the matter said.
Business travel is capped and the range of IT services has been cut, among other measures, the same source said, speaking on condition of anonymity because they are not authorised to speak publicly.
SocGen declined to comment for this story.
Romain Burnand, chairman of Moneta Asset Management, which has a 0.46% stake in the bank based on LSEG data, said the cost-cutting measures are starting to translate into results and he is betting on an improved performance in the third quarter.
"There were some real disappointments with the (last quarterly) results. But it's a valuation that we think is very depreciated and the bank has strengths," said Burnand, whose SocGen holding is around 4% of its 1.8 billion-euro main fund.
The CEO has opted to bolster the bank's capital reserves rather than aiming for quick returns or transformative asset sales. The Guinea deal will have a positive impact of around 2 basis points on the bank's common equity tier 1 ratio, a key measure of financial strength.
Krupa dashed investor hopes of higher returns when he postponed a key profitability target by a year, aiming for a return on tangible equity between 9% and 10% in 2026, while limiting the payout ratio to 40%-50%.
“I wouldn't say they are not on track on the targets, but we can only know they’ll get there when we start to see the proper inflection in earnings, especially in the French retail banking business. And so far, it hasn't happened," said Flora Bocahut, an analyst at Barclays.
"It's not a question of ambition," said Olivier Casse, head of core European equity strategies at Sycomore AM, which holds a 0.4% stake in SocGen, according to LSEG data. "The new CEO wanted to tackle the issue of capital."
That means lower share buybacks and dividends, which is weighing on the share price. SocGen shares closed at 22.9 euros on Thursday, down from around 26 euros in September last year just before the strategic review was announced.
FRENCH RETAIL
Another concern is SocGen's retail business in France, where the bank cut a key target in August, which overshadowed the bank's second-quarter earnings and weighed on its shares.
French banks, including SocGen, have not benefited as much from the rise in interest rates because of the high cost of deposits in France. SocGen also suffered because of a miscalculated interest rate hedging policy.
The bank's net interest income (NII), or the difference between what a bank earns on loans and pays out for deposits, was hit, prompting it to cut its previously set target.
Casse said: "They weren't able to reassure us about the trajectory ... in the second half of the year, and in 2025 regarding this interest margin."
Sebastiano Pirro, chief investment officer at Algebris Investments, referring to the CEO's plans, said: "The execution has been fair, it is the communication that has been poor." Algebris doesn't currently have a stake in SocGen, according to LSEG data.
SocGen's problems, he said, were weak profitability and too little capital to cut costs dramatically.
TAKEOVER SPECULATION
UniCredit's CRDI.MI swoop to take a stake in Commerzbank CBKG.DE has boosted bank stocks and analysts have speculated that SocGen could become an M&A target.
Two investment bankers who cover the European finance sector dismissed that idea, saying SocGen's exposure to France's low-margin retail market did not make it attractive.
The bankers said a takeover by bigger rivals BNP Paribas BNPP.PA or Credit Agricole CAGR.PA would create antitrust concerns and scrutiny from French authorities over jobs, among other hurdles.
($1 = 0.8959 euros)
Societe Generale's valuation has lagged rivals for years https://reut.rs/3Tzj3D5
Reporting by Mathieu Rosemain in Paris;
Additional reporting by Tommy Reggiori Wilkes and Sinead Cruise in London. Editing by Anousha Sakoui and Jane Merriman
Relaterade tillgångar
Senaste nytt
Ansvarsfriskrivning: XM Group-enheter tillhandahåller sin tjänst enbart för exekvering och tillgången till vår onlinehandelsplattform, som innebär att en person kan se och/eller använda tillgängligt innehåll på eller via webbplatsen, påverkar eller utökar inte detta, vilket inte heller varit avsikten. Denna tillgång och användning omfattas alltid av i) villkor, ii) riskvarningar och iii) fullständig ansvarsfriskrivning. Detta innehåll tillhandahålls därför uteslutande som allmän information. Var framför allt medveten om att innehållet på vår onlinehandelsplattform varken utgör en uppmaning eller ett erbjudande om att ingå några transaktioner på de finansiella marknaderna. Handel på alla finansiella marknader involverar en betydande risk för ditt kapital.
Allt material som publiceras på denna sida är enbart avsett för utbildnings- eller informationssyften och innehåller inte – och ska inte heller anses innehålla – rådgivning och rekommendationer om finansiella frågor, investeringsskatt eller handel, dokumentation av våra handelskurser eller ett erbjudande om, eller en uppmaning till, en transaktion i finansiella instrument eller oönskade finansiella erbjudanden som är riktade till dig.
Tredjepartsinnehåll, liksom innehåll framtaget av XM såsom synpunkter, nyheter, forskningsrön, analyser, kurser, andra uppgifter eller länkar till tredjepartssajter som återfinns på denna webbplats, tillhandahålls i befintligt skick, som allmän marknadskommentar, och utgör ingen investeringsrådgivning. I den mån som något innehåll tolkas som investeringsforskning måste det noteras och accepteras att innehållet varken har varit avsett som oberoende investeringsforskning eller har utarbetats i enlighet med de rättsliga kraven för att främja ett sådant syfte, och därför är att betrakta som marknadskommunikation enligt tillämpliga lagar och föreskrifter. Se till så att du har läst och förstått vårt meddelande om icke-oberoende investeringsforskning och riskvarning om ovannämnda information, som finns här.
