(Adds deputy CEO's comments)
By Christopher Spink
LONDON, May 4 (IFR) - Societe Generale’s mixed first-quarter results were overshadowed by the French bank’s agreement to pay €963m to settle a civil claim brought by the Libyan Investment Authority relating to €2.1bn of transactions in 2007.
A London high court hearing in the dispute had been scheduled to start this week but has now been cancelled following the confidential agreement between the two parties. SG executives declined to say any more about the case.
“By settling this dispute ... we avoid a long trial that would have demanded a lot of resources,” said SG chief executive Frederic Oudea on a press conference call to discuss the financial results. The Libyan Investment Authority did not immediately respond to a request for comment.
The bank took an additional €350m charge against a possible settlement in the first quarter meaning it is now “fully covered”.
The group’s investment banking division - global banking and investor solutions – saw revenues rise 5.4% to €2.48bn in the first quarter compared with the same period a year earlier. All parts of the division saw revenues increase except for financing and advisory, where they fell 2.6% to €557m.
Other major banks saw a strong recovery in debt and equity capital markets underwriting as well as advisory fees. SG joined in this revival but said “weaker asset financing in a highly competitive market”, which is also included in this figure, offset better performances elsewhere.
The biggest contributor remained fixed income, currencies and commodities. Here revenues rose 12.8% to €777m, the highest level for five years. This growth was lower than some US peers. But unlike many SG increased FICC revenues in the first quarter a year earlier, making it a tougher comparator.
"Our first-quarter revenues were encouraging, continuing on from 2016 when we managed to increase our market share," said Didier Valet, deputy chief executive and head of corporate and investment banking. "We were in line with most European banks."
Rates trading proved popular particularly in the first weeks of the quarter before activity tailed off somewhat. “The resurgence of political uncertainty around the elections in Europe and the direction of US policy led to a certain 'wait-and-see' attitude in the markets,” said the bank.
Equities a year ago had been weaker across the board. This time SG said stronger investor appetite for structured products, in Asia and Europe, had helped revenues improve 4.1% to €562m. Flow products, including cash equities, remained less active with low volatility.
Europe accounts for 70% of investment banking revenues with Asia contributing 14% and the Americas 16%.
Prime services revenues rose 9.3% to €176m as the integration of Newedge paid off. SG said it had increased market share here by 1.9 percentage points to 14.8%. Across all investment banking divisions it has increased market share since 2013 by 30bp to 3.8%.
After stripping out costs relating to Euribor fines, operating expenses in the division fell 2% to €1.7bn as a cost-reduction plan started to have an impact.
"We have made progress in outlined cost cuts, and have strictly managed our risks," said Valet. (Reporting by Christopher Spink)