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Carlo Messina, CEO of Intesa Sanpaolo, discusses the bank's earnings and the outlook for the European banking sector.
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Tag: Earnings Announcements
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Societe Generale’s investment bank limits first-quarter profit plunge
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French bank Societe Generale reported second quarter results for 2023.
Chesnot | Getty Images News | Getty Images
French bank Societe Generale reported a smaller-than-expected 22% slide in first-quarter net income on Friday, as profits on equity derivative sales offset more weakness at its retail bank and in fixed-income trading.
France’s third-biggest listed lender, whose CEO Slawomir Krupa is seeking to end several years of lackluster performance and trim costs, said group net income over the first three months of the year was 680 million euros ($729.30 million).
This was down 22% from a year earlier but still beat the 463 million-euro average of 15 analyst estimates compiled by the company.
Sales slipped 0.4% to 6.65 billion euros, above the 6.46 billion-euro analyst average estimate.
Helped by euro zone interest rates remaining higher for longer than expected, many European banks have beaten expectations for the first-quarter, and some have raised profit targets for the year.
French banks including SocGen have not benefited as much from the rise in rates because of the high cost of deposits in the country. Their shares have underperformed, although analysts expect the lenders to do better when rates fall.
SocGen’s investment banking division saw its earnings jump 26.4% to 690 million euros, beating forecasts, while revenues weakened 5.1% to 2.62 billion euros for the quarter.
Equity derivatives sales, an area where SocGen has historically been strong, did well, the bank said, as did corporate financing services and its advisory business.
Hedging policy
This offset a 17% fall in sales from trading in fixed income and currencies, underperforming the average of Wall Street firms and French rival BNP Paribas. Deutsche Bank delivered a 7% rise in fixed income and currencies trading revenue.
SocGen said it continued to suffer from a costly hedging policy aimed at protecting the bank against low rates but which backfired. It cost SocGen 300 million euros in the first quarter, on top of 1.6 billion euros in 2023.
The bank no longer reports numbers for its French retail activities, more crucial to its earnings than for BNP Paribas, as a standalone business.
SocGen said the transfer from sight deposits to regulated savings account with a fixed interest rate weighed on its results.
According to a recent study by UBS, French deposits were the most expensive in Europe when rates were negative. But they increased in cost just as quickly as the European average when rates and inflation rose.
SocGen stock price evolution has trailed peers over the last three years, with shares up 9%, compared with a rise of 26% for BNP and 13.5% for Credit Agricole. The basket of STOXX Europe 600 banks has risen by 55% over the period.
Krupa, who took over just a year ago, disappointed investors last September by putting off a key profitability target by a year, amid stagnating sales, until 2026.
He has pledged to revive shares by trimming costs and delivering on targets, while selling non-core assets and investing to deploy its online bank BoursoBank and its expanded car-leasing listed group Ayvens.
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Suncorp CEO is ‘very confident’ in the company’s future as a pure-play insurer post ANZ deal
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Steve Johnston, Suncorp’s Group CEO, says the company still has “work to do” to close the ANZ-Suncorp bank deal but remains confident it will succeed.
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ANZ CEO says Suncorp Bank acquisition is ‘important but not critical’ to the group
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Shayne Elliott, CEO of ANZ says the bank’s strength is coming from its international diversification, adding that the proposed acquisition of Suncorp Bank would be “exciting” for its Australian retail banking division.
06:15
Mon, Nov 13 20238:16 PM EST
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Housing demand remains strong despite rising interest rates: Brickworks MD
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Lindsay Partridge, managing director of Brickworks thinks low rental vacancies and immigration is contributing to the strong property market in Australia, and says the company is well-positioned to take advantage of the coming cycle.
02:34
Thu, Sep 28 20233:07 AM EDT
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Emerging markets are oversold, Abrdn CEO says
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Stephen Bird, CEO of Abrdn, discusses the outlook for global markets and monetary policy.
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UOB’s CFO discusses the bank’s second-quarter earnings
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Lee Wai Fai, group chief financial officer at UOB, explains why it expects the second half of the year to be better than its challenging first half.
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Citigroup’s fourth-quarter profit declines by 21% as bank sets aside more money for credit losses
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Citigroup said it had identified the cause of the flash crash and corrected the error “within minutes.”
Jim Dyson | Getty Images News | Getty Images
Citigroup said fourth-quarter net income decreased by more than 21% from a year ago as the bank set aside more money for potential credit losses.
Shares rose 1.7% as investors looked to some positives in the report including a record fourth quarter for fixed income trading.
related investing news
Here are the fourth-quarter numbers versus what Wall Street expected:
- Net income: $2.5 billion versus $3.2 billion a year ago.
- Earnings: $1.10 a share, excluding certain divestitures. (It was not clear if that was comparable to the $1.14 a share estimate from analysts.)
- Revenue: $18.01 billion in revenues, above the $17.9 billion expected from analysts polled by Refinitiv.
- Net Interest Income: $13.27 billion, above the 12.7 billion expected by analysts, according to StreetAccount
- Trading Revenue: Fixed Income $3.16 billion, above expectations. Equities trading was $789 million, below expectations.
- Provision for credit losses: $1.85 billion compared to $1.79 billion expected by analysts polled by StreetAccount.
CEO Jane Fraser’s turnaround efforts at Citigroup have hit a snag amid concerns over a global economic slowdown and as central banks around the world battle inflation. Like the rest of the industry, Citigroup is also contending with a sharp decline in investment banking revenue, partly offset by an expected boost to trading results in the quarter.
Citigroup’s net income slumped 21% to $2.5 billion from $3.2 billion in the previous year, largely due to slowing loan growth in its private bank alongside expectations for a weaker macroeconomic environment going forward. The weakness was partially offset by higher revenues and lower expenses.
The bank said it set aside more money for credit losses going forward, increasing provisions 35% from the previous quarter to $1.85 billion. This build included $640 million for unfunded commitments due to loan growth in the private bank.
Revenues in services and markets divisions increased 32% and 18% respectively, driven by growth in interest income and in fixed income markets. The fixed income markets division saw revenues jump 31% to $3.2 billion, the highest fourth-quarter results ever, due to strength in rates and currencies.
“With their revenues up 32%, Services delivered another excellent quarter, and we have gained significant share in both Treasury and Trade Solutions and Securities Services,” Fraser said in a press release. “Markets had the best fourth quarter in recent memory, driven by a 31% increase in Fixed Income, while Banking and Wealth Management were impacted by the same market conditions they faced throughout the year.”
There was also strength in banking, with private bank revenues gaining 5% and U.S. personal bank revenues up 10%. Retail banking revenues, however, fell 3% due to lower mortgage volumes.
JPMorgan, Bank of America and Wells Fargo also reported earnings on Friday. JPMorgan topped analyst estimates for the quarter and said that it now sees a mild recession as the base case for 2023. Bank of America also beat Wall Street’s expectations as higher interest rates offset losses in investment banking.
Wells Fargo shares rose despite the bank reporting that profits fell in the latest quarter due to a recent settlement and the bank’s boosted reserves amid economic weakness.
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