February 6, 2020 / 9:40 AM / 12 days ago

RPT-UPDATE 2-France's SocGen courts investors with capital boost, possible buyback

(Repeats to add share price graphic)

* SocGen says CET1 ratio target at 12%

* Says ROTE to improve in 2020

* Expects modest group revenue growth in 2020

* Shares higher having underperformed French peers

PARIS, Feb 6 (Reuters) - Societe Generale, France’s third-biggest bank, boosted its capital in the fourth quarter following asset sales and revealed the possibility on Thursday of a share buyback as quarterly revenue rose.

Frederic Oudea, SocGen’s chief executive since 2009 is trying to lift the bank’s profitability and solvency in the face of negative interest rates and challenging financial markets.

SocGen expects its profitability to improve in 2020, although there was little chance it would reach the target of 9%-10% return on tangible equity (ROTE) it previously set as a target for 2020. Its ROTE in 2019 stood at 6.2%.

The bank, whose shares have lagged peers, expects French retail revenue to be between 0%-1% lower in 2020 than in 2019 when it declined by 1.5%, weighed by low interest rates. “In 2020, the Group expects an increase in Group net income compared to 2019, with slight growth in revenues in the current environment and a reduction in the Group’s operating expenses,” the bank said in a statement.

“BACK TO NORMAL”?

Fourth-quarter results showed a 4.8% rise in quarterly revenue to 6.21 billion euros ($6.8 billion), helped by growth in French retail and global markets.

“We believe SG is on its way back to normal with sound underlying trends and solid capital,” analysts at Jefferies said in a note, adding that revenue was above their expectations.

The bank’s common equity tier one capital ratio - a key measure of financial health - rose to 12.7% at end-December from 12.5% at end-September.

SocGen said it will maintain a 50% dividend payout ratio for next year when shareholders would be remunerated in cash or a possible “share buyback component of up to 10%”.

The share price was up 1% at 0903 GMT. SocGen’s market value has dropped by a fifth since the appointment of Oudea, in line with the European banking index.

Over the same period of time its French peers have done much better: BNP Paribas has risen by 7% and Credit Agricole by 23%.

Chairman Lorenzo Bini Smaghi praised the determined action by Oudea to lift the company’s performance.

($1 = 0.9094 euros)

Reporting by Maya Nikolaeva; Editing by Sudip Kar-Gupta and Elaine Hardcastle

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