SocGen earnings Q4 2022

Society Generale on Wednesday reported a 64% fall in full-year net income for 2022, weighed down by lower activity at its domestic banking unit, currency effects and increased operating expenses.

The French bank said net profit for the last quarter of 2022 was 1.16 billion euros ($1.24 billion), bringing annual profit to 2.02 billion euros. For comparison: the bank had reported a net profit of 5.6 billion euros at the end of 2021.

The latest results came in higher than expected. According to Refinitiv, analysts had estimated net income of 905 million euros for the quarter and 1.5 billion euros for the full year.

“The group is confident of being able to benefit from ongoing projects and business developments, confirms its financial guidance for 2025 and enters 2023 with determination, a year of transition in many respects,” said CEO Fréderic Oudéa in a statement.

Here are more highlights from the results:

• Sales increased by 8% over the course of the year to 28.1 billion euros.
• Operating expenses increased by 5.9% over the last 12 months to 18.6 billion euros.
• The CET1 ratio, a measure of banks’ solvency, was 13.5% compared to 13.1% at the end of the third quarter.

Based on last year’s performance, the lender announced that it would pay out EUR 1.70 per share to shareholders and implement a share buyback program of around EUR 440 million this year.

However, the bank said the outlook for 2023 was challenging, adding that it will be a “transition year” in which its domestic unit is likely to report lower revenue due to changes in monetary policy in the region.

Speaking to CNBC’s Charlotte Reed, Oudéa said “in 2023 we expect more revenue pressures”, citing the fact that banks in France will not benefit “immediately” from the normalization of interest rates.

The European Central Bank hiked interest rates four times in 2022 and earlier this month announced another hike of 50 basis points. After several years of negative interest rates, this has meant a significant change of course in monetary policy. Basically, higher rates mean higher margins for commercial banks.

More broadly, Oudéa warned of “a lot of uncertainty”.

“We should see in this key scenario inflation peaking and gradually falling with interest rates also falling from 2024, that is the key scenario, there remains a lot of uncertainty – let’s be honest you can have a higher inflation scenario longer and that would mean higher interest rates going forward,” he said.

The latest results also represent the latest full-year results under the leadership of CEO Fréderic Oudéa, who has been in office for more than a decade. Slawomir Krupa, previously head of the investment banking division, is to take over in the coming months.

Shares of the French lender are down more than 20% over the past 12 months.