EuroBusinessMedia (EBM): Societe Generale, one of the largest European financial services groups, reports its first quarter results for 2019. Frédéric Oudéa, hello.
Frédéric Oudéa: Hello.
EBM: You are the CEO of Societe Generale. What’s your analysis of the Group’s Q1 results for 2019?
Frédéric Oudéa: I would say the main achievement of this first quarter is the very strong increase of our capital ratio, our core Tier 1: +55 basis points. And it’s an important element because it was a question mark for the investors, whether or not we should be able to effectively meet our capital trajectory. I think this first quarter is definitely a key milestone and it’s a mix of results: a strong discipline in the monitoring of our risk rated assets and, of course, the benefits of the disposals which have been closed.
Beyond, regarding the P&L, I would say: no bad surprise. Business revenues are progressing despite an environment which is not very good in Europe. The costs are being well monitored; the cost of risk remains very low. All in all, we have a resilient profitability - 8.4% return on tangible equity - so I think it confirms the quality, the robustness of the business model, and it’s encouraging for the beginning of the year.
EBM: More specifically now, what were the trends in your main business lines?
Frédéric Oudéa: Clearly, we see a contrast from one business to the other.
If we start with the French Retail Banking, the commercial activity is good. The French economy is doing OK, and we’ve seen a good growth of our credit and deposit outstandings. But still, the revenues are going down because of the low interest rate. The good news is that the interest margin is now stabilised versus end of last year. So we see the beginning of the inflection and, over all, we pursue of course the adaptation of our networks. We expect, this year, a progressive change, with an improvement of the revenue trend - a figure between 0 and -1% - to come back to growth of revenue next year in 2020.
We have seen again this quarter the confirmation of the growth potential for all our International Retail Banking activities and Financial Services. Strong increase of revenues, based on strong growth across the board (all geographies, all businesses), positive jaws with the cost, low cost of risk… All in all, an increase of the net profit despite the few disposals which have been closed again in this parameter, and an increase of profitability. I must say the outlook remains very good for all these businesses.
Regarding our Wholesale Banking activities, there is a contrast between the Financing and Advisory, which are growing very well, and a slight decrease of the revenues in the market activities, in an environment where in the first quarter there was a lot of wait-and-see mode of investors following the fourth quarter. All in all, revenues are stable and we are implementing our new plan and the adjustment of the capital allocation to these businesses.
All in all, pretty resilient performances of the Group, encouragement for the full year.
EBM: Could you expand a bit on how the execution of your strategy is being adapted?
Frédéric Oudéa: Really, what we want to achieve is a long-term plan, and the goal is to be able to accompany our clients in their positive transformations. And of course, we have, ourselves, to further adapt. 2019 will be a very important year for that.
If I take the French Retail Banking, it is a key step forward in terms of the digitalisation of our processes and, of course, we pursue the adaptation of our branch network. We pursue the closure of branches, the adaptation of our back offices, there are many changes in the organisation as well as pursuing the development of new business models. As I’ve said, I’m positive with the positioning of Societe Generale in this market.
Regarding the International Retail Banking, we have achieved the refocusing in terms of geographical footprint. Really, it’s about taking full advantage of markets which have good economic prospects, with better interest rate environments, and which should really show their capacity of further growing. Growing market share, growing revenues, of course with a strong discipline on the cost and risk and hence this is the growth driver today of Societe Generale.
And it is regarding the Wholesale Banking business that we have announced effectively, in the beginning of the year, an adjustment of our strategy, an adjustment of the capital allocation. It has been announced, it is now being implemented. What is very important is, as we do that, at the same time of course, to carry on being close to our clients. And I’m very confident about this, because we are preserving the consistency of the business model with our core clients, and hence, it’s a question of execution, but I’m confident that we have the capacity to execute.
All in all, as you can see, a lot of hard work, but a lot of energy, a lot of determination. I must say a strong confidence that 2019 will be a good year for Societe Generale with a lot of achievements.
EBM: Frédéric Oudéa, thank you very much.
Frédéric Oudéa: You’re welcome.
