EuroBusinessMedia (EBM): Societe Generale, one of the largest European financial services groups, reports results for the first half of 2020. Frédéric Oudéa, hello.
Frédéric Oudéa: Hello.
EBM: You are the CEO of Societe Generale. How did the company perform in the second quarter during the height of the COVID 19 crisis?
Frédéric Oudéa: Well of course you see in our financial results the impacts of the lockdowns of a lot of economies in the world, which took place in the second quarter. So it means a decrease of revenues in most of our activities, with the good news to see a rebound since mid-May or June depending on the geographies.
We see a decrease of cost across the board, thanks to a strong discipline there.
In terms of cost of risk, as you know we had to take into account not only the defaults, but effectively the accounting IFRS 9 rules, which means to look forward and try to forecast the future defaults - it’s a buffer for the future - so the cost of risk is increasing, but what we are saying is that we should be, for the full-year, at the low end of the range we gave to the market, 70 basis points to 100 basis points, so that means a lower second half than first half.
In terms of capital, strong ratio, much above any regulatory constraints or requirements, and also liquidity, which means that we can further develop business and accompany our clients.
And overall, a net result which is at breakeven, excluding two non-cash exceptional items, with the revision of the perspective of our capital market activities, we have the amortisation of the goodwill related to this activity, as well as the decrease of the inventory of deferred tax assets.
EBM: Let’s talk about your various business lines now. What were the key trends?
Frédéric Oudéa:
Well, if we start with
French retail, obviously our priority was to accompany the clients with these guaranteed loans, something like €18 billion just for Societe Generale. We were there, and I think it’s very important as well as with other activities, because it’s a goodwill that we’ve built during this crisis. We saw a decrease of revenues, commissions, with obviously less activities, as well as an increase of deposits, people saved a lot, but with negative rates it hurts the deposit and interest margins. In terms of cost of risk, similar to the Group, forward looking to place in the buffer going forward.
In terms of
international retail, we saw the same kind of trend with lockdowns across the board, decrease of revenues, some variations from one country to the other. On top of that also decrease of interest rate, for example in the Czech Republic, decrease of cost as well as in the French retail, thanks to our efforts, cost of risk including IFRS 9. And same thing, rebound since June, a pretty robust rebound.
And then, on
Corporate and Investment Banking, a contrasted picture:
- increase of revenues on the Financing and Advisory side, despite strong capital discipline in terms of commitment of balance sheet;.
- Record revenues in FIC, credit, rates and foreign exchange;
- and in equity, in particular in the structured products which were still impacted at the beginning of the quarter by the same issues than in the first quarter, a progressive recovery, month after month;
- and very importantly, we were able to define a new strategy: we will maintain our leadership franchise, but with a different range of products, with overall a capacity to reduce the impact on our revenues with similar shocks as the one we had in the first half. With also an effort on the cost to ensure, of course, that we will more than compensate the reduction of revenues.
EBM: And finally, going forward, what will be your priorities as the economy is set to worsen?
Frédéric Oudéa: First, if I draw the lessons of this first half, we’ve been able to absorb this extraordinary shock, there are impacts on our P&L, but overall, the bank is robust, capital tier ratios are there, the quality of the portfolio makes us comfortable to monitor the cost of risk and we are able to think forward.
We have also, as I have said, built a very strong goodwill with our clients and I would like to thank all our teams. We were able to protect them also as well as our clients, of course, it was a top priority.
So we are able, again, to think forward and rebound as well as with the economy. The priorities will be really around three dimensions.
- Client centricity: client needs have changed in this crisis, will further change, and when I think about this it’s of course around digital channels and transformation, but it’s not just around this.
- Second: corporate and social responsibility, environmental issues are key. We have taken further initiatives, in the middle of the crisis, in terms of coal financing or pretty pioneer projects for renewable energy. We want to pursue that and enshrine this contribution to this energy transition in all the strategies of our businesses. But it's also around us being a company, so in terms of diversity we have highlighted the need to do more, have clear objectives as well as thinking in terms of a new way of working, going forward.
- And then around efficiency, operational efficiency, we have to do more in terms of costs. We have again taken some initiatives, we will pursue them, again a lot will be related to digital transformation and technologies.
All in all, as I’ve said, I think we can look forward, rebound, and it will be the priorities of the coming weeks.
EBM: Frédéric Oudéa, thank you
Frédéric Oudéa: You’re welcome.
