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February 12, 2014 9:15 am
Société Générale has said that its quest to improve its balance sheet amid new European regulation is drawing to an end, reporting improved capital ratios, the repayment of cheap central bank funds and promising a greater dividend.
On Wednesday the third-largest French bank by assets announced it had paid back the cheap funds borrowed from the European Central Bank two years ago, its compliance with tougher Basel III capital rules and a 2014 dividend rise from €0.45 to €1 a share.
“The structural transformation of the balance sheet is complete,” said Frédéric Oudéa, chief executive, adding that the group was now focused on improving profitability with a return on equity target of 10 per cent.
Fourth-quarter earnings came in ahead of expectations with the group reporting an 11 per cent rise in consumer banking earnings, helping it to post a total fourth-quarter net profit of €322m, above the €471m loss in the same period last year.
This was linked to an improvement in the group’s consumer banking activities in France and Russia as Europe tentatively emerges from recession.
Data from Markit showed the eurozone purchasing managers’ index at its highest level in more than two years, climbing from 52.1 in December 2013 to 52.9 in January, in a further sign of a recovery taking hold.
Revenue rose 13 per cent to €5.78bn, also helped by the bank’s financial services and insurance divisions. But results were held back by weakness in the group’s fixed income division, hit by the wider slowdown of fixed income trading volumes.
Retail banking in France has long been a cash cow for the French banks, although in the past two years growth has slowed amid weak economic growth. All lenders have been seeking to cut costs in retail operations as a result.
The group has for years been struggling with its operations in eastern Europe. Recession-hit Romania has been largely unprofitable since the financial crisis and last year the head of its Russian unit was arrested on bribery charges.
But the results showed an improvement in these divisions, with Russian consumer-banking profits rising from €61m in the same period of the previous year to €69m, alongside a “stabilisation” of revenues in Romania.
The bank suffered from a €446m fine imposed by the European Commission following an investigation into in the alleged rigging of the euro interbank offered rate, or Euribor.
The group said its core Tier 1 ratio, a key measure of a bank’s financial health, stood at 10 per cent at the end of December, above the 8 per cent minimum required by regulators by 2019.
Its leverage ratio, which compares capital to total assets, was at 3.5 per cent at the end of the year, higher than the 3 per cent threshold set for 2018.
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