SocGen Reports Smaller-than-expected Loss After Costly Russia Exit

Buoyant retail and investment banking activity helped Societe Generale to report a smaller-than-expected loss in the second quarter as it absorbed a 3.3-billion-euro hit following the sale of its Russia business.

The French bank, which is seeking a new chief executive, on Wednesday reported a 1.48-billion-euro loss ($1.51 billion), while analysts on average had expected a loss of more than 2 billion euros.

SocGen's shares rose 3% and were the strongest performers within the pan-European banking index.

Net banking income rose just over 7 billion euros, about 600 million euros higher than expected, while operating expenses came in lower at 4.46 billion euros, the bank said, as it confirmed the launch of a 915 million euros share buyback plan.

"These are excellent results, with the good news of the share buyback and ambitious but achievable goals," Jerome Legras, head of research at Axiom Alternative Investments, said.

The group's ROTE (Return On Tangible Equity) profitability ratio stood at 10.5%. The group said it is aiming for profitability (ROTE) of 10% and a CET 1 ratio of 12% in 2025.

"We confirm our ability to deliver profitability of 10% on the basis of a target core Tier 1 capital ratio of 12%", CEO Frederic Oudea said in a statement.

Among other ambitions set for the next three years, the bank seeks to deliver a cost-to-income ratio of 62 or below and maintain a pay-out ratio of 50% of its profits.

Revenue rose 23.3% to 1.5 billion euros in the global markets business, where equity trading activity increased by 7.5% to 833 million euros, while fixed income and currency activities increased 50% to 683 million euros.

Meanwhile, French and international retail reported a rise in net banking income of 8.5% to 2.26 billion euros and 12.7% to 1.27 billion respectively.

LOOKING FOR A NEW CEO

In May, Societe Generale closed the sale of its Russian business Rosbank to the Interros group.

The same month, Frederic Oudea took investors by surprise when he announced he would step down next year as the CEO after running the lender for 15 years and that his successor would be announced in the autumn.

Speculation on the future leader of France's third-biggest listed bank has so far centered around Sebastien Proto, currently engaged in merging SocGen's retail networks in France as well as Slawomir Krupa, head of global banking and investor solutions activities.

Jacques Ripoll, who just left Credit Agricole SA, Philippe Heim, the head of France's postal bank and Jean Pierre Mustier, former chief executive of Italy's UniCredit are among former SocGen executives mentioned as potential external suitors but no outside candidate has emerged as a clear front runner.

SocGen's results follow rival BNP Paribas, which reported a better-than-expected profit on Friday as business remained buoyant across business lines.