EuroBusiness Media (EBM): Société Générale, one of the largest European financial services groups, reports results for the first quarter of 2016. Frédéric Oudéa, welcome. You are the CEO of Société Générale. What was the beginning of the year like for Société Générale? Were your businesses impacted by the unstable environment like most of your peers?
Frédéric Oudéa: In a difficult environment for market activities at the beginning of the year and compared, on the contrary, with a stellar start in 2015, I think we have posted very robust performances. We take advantage of the benefit of our diversified business model, between retail activities, financing activities and capital markets, we’ve overall a business model which is less exposed than others to the situation of interest rates and in particular to negative interest rates. All in all, our revenues are going slightly down, but the impact of markets on our market revenues is compensated basically by the strong performances of our retail activities and financing activities. We have put a lot of focus on cost management and the cost of risk is going down. Overall, when I look at the net profit of the group it is slightly increasing and it’s stable if I put aside non-economic items. On top of that we are pursuing the reinforcement of the balance sheet, the capital ratio stands at 11.1% compared with 10.9% end of last year. So all in all, a lot of very positive signs and I think again that reflects the quality of the business model and the level of synergies which is progressively further increasing. We have a strong integration between our businesses that enables us to conquer new clients with lower costs and to benefit from that integration.
EBM: Let’s turn now to your French retail banking which is showing a strong commercial and financial momentum in a low interest rate environment. So how do you explain this performance?
Frédéric Oudéa: First of all, on the back of the very strong performance in 2015 we carry on conquering new clients. 1000 new French corporates have entered a relationship with Société Générale in the first quarter. More than 60,000 new clients with Boursorama, our online banking. We are carrying on developing our business models and our new clients. It means that we are able to absorb the negative impact of low interest rates and even negative interest rates in France as well as in the Euro zone. The revenues are just going down slightly. We carry on with the transformation of our model. The costs are under control and the cost of risk is going down. Hence we are able to post an increase of contribution of the French retail and a very strong profitability. So the French retail confirms its status as a pillar of stability. We can’t expect a lot of growth from that part of the group, but it’s a pillar of profitability, an anchor on which we can carry on building.
EBM: In International retail banking and financial services, your earnings appear to evolve positively. What’s the reason behind this?
Frédéric Oudéa: I think for me it’s one of the big satisfactions or a big confirmation of what we have been saying to the market. This is, on the other hand, compared with France, French retail, an area of growth. Revenues are going up, close to 6%. We have businesses in International retail which are not exposed to negative rates, it’s outside the Eurozone and we have also very strong financial services, on one hand insurance, and financial services to corporates. Growth potential and across the board. Growth of loans in Africa, for example, in Europe which are strong. Beyond this, costs are stable, a lot of effort on productivity and the cost of risk is going down. All in all, we have been able to double the net contribution of the business to the group net profit compared with last year. And when you look at franchises like Russia, for example, we have been able also to confirm the reduction of the losses. So things are going really in the right direction. It’s a mix of organic growth, tailored acquisitions, for example, in the fleet management business we are also announcing the closing of an acquisition in France called Parcours, it’s an additional 60,000 new cars that we will manage. I like this business and there is plenty of potential for growth. So a lot of good perspectives going forward for that pillar of the group.
EBM: The first quarter was characterised by a difficult financial market environment. How did this impact Société Générale?
Frédéric Oudéa: It seems to me as our peers are progressively communicating on their results that actually our performance is in relative terms pretty good. Yes, we have a decrease of revenues of capital market activities, -13%, but it’s less than most of our peers. That shows the resilience of our model and to a certain extent when equity is not doing that well and going down, the fixed income activities, on the contrary, increase compared to last year, all in all limited a decrease of revenues. The financing activities that we are developing are carrying on growing at close to 8% compared with last year. All in all, it’s a very resilient model in terms of revenue and it’s a client driven model. In terms of costs we are paying a lot of attention to reduce the costs. We have announced an additional savings plan, €220 million of savings at the horizon of end 2017, on top of what we have already announced, and the cost of risk is under control, despite the impact of low oil price. All in all, very resilient profitability, I’m positive on these businesses and the capacity they have to further adapt.
EBM: And finally, what is your outlook for the rest of 2016?
Frédéric Oudéa: I remain I must say overall positive for the rest of 2016 in an economic environment which is not that bad, the Eurozone figures at the beginning of this year are a little bit above what was expected; growth in the US might be around 2%; it seems that the oil price is stabilising which is probably good also for certain emerging countries. I mean overall it’s not that bad an environment from an economic point of view. We all know about negative rates but again we are less impacted than others by the negative rates in the Eurozone, so I’m confident that we are going to further deliver solid performances and further transform the group to adapt our businesses to a new environment from a regulatory point of view as well as economic and financial point of view. So I’m positive and the beginning of the year is a confirmation of that optimism.
EBM: Frédéric Oudéa CEO of Société Générale, thank you very much.
Frédéric Oudéa: You’re welcome.
