EuroBusiness Media (EBM): Societe Generale, one of the largest European financial services groups, publishes results for the first half of 2017. Frédéric Oudéa, hello. You are the CEO of Societe Generale, how has the group fared in the second quarter of 2017?
Frédéric Oudéa: I think the group posted sound performances across the board. And despite a more contrasted environment, in terms of market activities in particular, we were able to benefit from an integrated and diversified business model. And in particular, we confirm the growth potential of our International Retail Banking activities which were able to compensate for the decline of the revenues in French retail because of the interest rate environment. All in all, we were able to post stable business revenues, with, as I’ve said, the capacity to compensate for the slightly more deteriorated environment.
We carry on monitoring strictly the costs. We benefit from a very low cost of risk that reflects the quality of the portfolio of credit, hence putting aside the non-economic items and the non-recurrent ones, in particular the one related to the settlement of our litigation with the LIA. We were able to post an underlying profit which is improving by 11%. And very importantly for the first half, the return on equity is also progressing and, at 9.5%, shows our capacity to meet our targets.
EBM: Are the group’s growth drivers confirming their potential, notably in Retail Banking and International Banking and Services?
Frédéric Oudéa: Definitely, and I would say it’s across all the businesses and all the geographies. The portfolio of loans is increasing strongly at something like 8%, and it’s true for all the geographies. Europe, on the back of a better economic environment. Russia which is also recovering and we are back again to profit, in line with our target for this year. Also Africa, which is growing. And of course the Financial Services activities, both for example Insurance and Leasing.
So, all in all, it’s a business which is growing and which is improving significantly its profitability because you have positive jaws between revenues and costs. And again, here in this division the cost of risk is at a very low level. So very, very positive results indeed for this second quarter.
EBM: In France, how has retail banking adapted to the interest rate environment that remains unfavourable?
Frédéric Oudéa: First of all, the very important and positive aspect is that we carry on developing, conquering clients: something like 250,000 new individual clients, with Boursorama now being above 1.1 million clients, and 1,400 new business customers entering a relationship with Societe Generale. So, we are developing.
Despite this positive volumes effect, the revenues are slightly going down because of the interest rate environment, which is still penalising the net margin income. The positive element is that we see our fees growing, and progressively the structure of the revenues is shifting towards more fees and I think it’s positive going forward. We are also investing, transforming the network, but at the same time monitoring the other costs. And we are also here benefiting from the quality of the credit portfolio with a cost of risk which is low.
All in all, the profitability remains resilient despite this more negative interest rate environment.
EBM: How has your Global Banking and Investor Solutions activity been affected by the sluggish market environment in the second quarter?
Frédéric Oudéa: I think in the second quarter we benefitted again from the fundamental transformation of our Global Banking and Investor Solutions activities, with a model which has as an objective a resilient revenue contribution. And we faced a less favourable market environment than last year: you know there was the Brexit last year, more volatility in the second quarter, a more wait-and-see mode of the investors, so less flow activity on the equity, for example, but very good activity on structured products.
Overall, I think this business is developing, something which is well suited for the new regulatory framework and for the needs of the clients. We also benefitted from all the efforts on the decrease of costs – it was all the efforts last year of savings programmes. And we have also a very low cost of risk in this division, which reflects, again, the very high quality of the credit portfolio.
So, this division, despite this slightly less favourable environment, improved its return on equity, its profitability, which is our objective.
EBM: And finally, what is your outlook for the second half of this year? Are you confident that the economic environment is improving, especially here in France?
Frédéric Oudéa: I’m pretty optimistic regarding the outlook for the coming quarters, and the second quarter results for GDP growth in Europe and in France in particular were pretty solid. I think the level of confidence is improving and I’m pretty positive.
On the back of this better environment, what are our perspectives and ambitions? First of all, complete this remediation phase I’ve been presenting: putting behind us the litigation of the past, turning this page of remediation. And preparing our new strategic plan: taking advantage of probably a better environment, a better interest rate environment potentially, and of course carrying on transforming the business model, taking advantage of all our growth drivers. We are working on this new strategic plan that we will be presenting to the market at year-end and the idea is, again, to be even more focused on the clients, more agile.
We have put in place a new organisation in the first half, which will be implemented starting in the second half, and I think we will benefit from that in terms of better capacity to innovate, better capacity to anticipate the evolution of the behaviours of the clients which are changing. We are in an industry which is changing dramatically, and I think we will be able to seize the opportunities too, not just the difficulties, of that transformation.
EBM: Frédéric Oudéa, thank you very much.
Frédéric Oudéa: You’re welcome.
