EuroBusiness Media (EBM): Société Générale, one of the largest European financial services groups, publishes 2015 third quarter results. Frédéric Oudéa, welcome. You are the CEO of Société Générale, what would you say are the main takeaways from the third quarter?
Frédéric Oudéa: Overall, I would say these results for the third quarter reflect an additional milestone of further progress in our strategic roadmap. When you look first of all at the commercial dynamism, all the businesses are doing well. It’s very important to nurture future revenues, and the revenues are progressing. Second, we show, again, our good monitoring of our costs and of the cost of risk. The cost of risk is confirmed at a low level that reflects the quality of the portfolio. All in all, it means the net profit is growing. And very importantly also, as you know – which is the focus of investors – the capital base is again progressing. The core Tier 1 ratio increases to 10.5%, in line with our roadmap to reach 11% at the end of 2016. So, as you can see, overall good results. I’m happy with that. A further progress towards our target.
EBM: So strong results overall, and in particular, the retail banking sector has put up strong numbers. What would you say are the drivers of this growth?
Frédéric Oudéa: It’s certainly one of the highlights of these third quarter results. Let’s start with France. France is delivering, again, very strong results. An exceptional acquisition of new clients: the number of new clients (current account openings) is exceptionally high – historically high. It means that the business model makes sense for our clients, and it translates into good momentum for deposits, good growth of our credit production, and it means, in terms of revenues, margin interest and fees are growing. Second, very importantly, as I said, cost monitoring is fine and the cost of risk is low. And that’s part of the efforts we’ve made, to better originate the credit. All in all, we had a very strong increase of the net profit and a very good profitability based on very solid commercial foundations.
Let’s look, then, at overseas – international retail. Same thing, across the board, we have very good commercial performances: in terms of deposits, in terms of loans, in the different geographies, for financial services as well as retail or insurance. And even in Russia, where the situation is overall stabilising, we see a good progress of NBI and a further reduction of the losses, for the second quarter in a row. So, all in all, we expect a lot from this division, and to contribute in terms of net profit. We see the progress, step by step, quarter after quarter, and we are not very far from the targets for 2016. So that’s very encouraging.
EBM: On the other hand, your Global Banking and Investors Solutions (GBIS) division has suffered from poor market performance and high volatility…
Frédéric Oudéa: After stellar performances in the first half in a very, very good market environment, we experienced in the third quarter a change of climate, and confidence decreased regarding China, the economic environment, etc. So, we have, effectively, more contrasted performances. It’s still very good in financing activities where we’ve decided to grow, definitely in the last two years now. It’s also good in Private Banking, in custody, or in the new business of Prime Services. It’s less positive in the other capital market activities, in equity and fixed income, in, again, a more adverse market environment with less activity – for example, on the primary side, in particular in Europe – and overall, more difficult market conditions in terms of hedging and our structured products. But fundamentally, if I look at the first nine months, it’s very good. The year is a good one. And I remain very positive on the prospect of development of GBIS.
EBM: And to conclude, you are speeding up the overhaul of your Retail Banking business in order to adapt to changing customer behaviour. What is that going to mean for your online banking activity Boursorama and for your networks of Retail Banking?
Frédéric Oudéa: It’s fair to say that, again, in this third quarter, a very important element is what we have announced after many months of hard work: to think about what the new technologies, what mobile can mean, in particular in developed countries, in mature economies, and with developed networks. Confident in the quality and consistency of that thought process, we’ve decided to accelerate.
On the one hand, the transformation of our existing network, Société Générale and Crédit du Nord, with a vision of a fully multi-channel distribution system. Which means, in the coming five years, the need to adapt our network of branches, the willingness to invest massively in new apps, in the digitalisation of processes, in new systems, and we will spend overall something like €1.5 billion in all these investments. And third, of course, the need to accompany our staff, because it will mean a lot of training needs, it will mean the change of functions, of businesses, of how to handle clients. So, a lot of transformation. But we are confident that everybody being aligned is more a question of execution, with the prospect to gain clients and, of course, maintain a good profitability for this business (15% after tax in terms of profitability) despite the pressure on revenues by the new technologies.
And the second thing is, of course, to accelerate the development of Boursorama, our native online bank. We are raising the objective of number of clients. We had in mind 1.5 million clients in 2020. Based on the success of Boursorama, we now raise this objective to 2 million and more – 2 million clients, at least, in 2020. So, we push in the two directions.
EBM: Frédéric Oudéa, CEO of Société Générale, thank you very much.
Frédéric Oudéa: You’re welcome.
