A Return to Profitability

Société Générale, the French banking group, has reported a net profit of €900 million in the second quarter, marking a return to profitability after a significant loss the previous year due to the sale of its Russian subsidiary, Rosbank. However, like its counterparts, the bank is facing a slowdown in activity. The bank's net banking income, equivalent to revenue for the sector, decreased by 8.9% between April and June, reaching approximately €6.3 billion. This decline is attributed to the impact of rising interest rates, which have weighed on the bank's accounts.

Challenges in the French Banking Sector

The decrease in revenue is primarily due to a decline in the net interest margin in France and a decrease in market activity, as the bank normalizes after a particularly favorable period. The bank had to urgently sell its Russian subsidiary in 2022, incurring a cost of €3.2 billion, while recovering from the impact of the Covid-19 pandemic, which pushed it into the red in 2020. However, the bank recorded a record net profit of €5.6 billion in 2021. The new CEO is set to present the bank's strategic roadmap on September 18 in London.

Diversifying Strategies

Société Générale, like other French banks, has experienced a decline in activity, primarily due to the increase in interest rates. In the French retail banking sector, revenues decreased by 13.6% in the second quarter compared to the previous year, with profits halved. However, Boursorama, the bank's online subsidiary, achieved a net profit of €47 million and aims to reach €200 million this year, prioritizing profitability over acquiring new customers by reducing marketing expenses.

Divisional Decline

Despite excluding the impact of Rosbank, all divisions of Société Générale experienced a decline in profits. The retail banking division in France saw a 14% decrease in net profit, while the international retail banking division, which includes insurance and specialized services such as automobile leasing, experienced a 14.6% decrease in net profit, despite a 6.3% increase in revenue. This was due to a significant increase in management expenses resulting from the integration of LeasePlan, acquired for €4.8 billion in May.

Managing Risk and Exceeding Expectations

The bank's cost of risk, which refers to provisions made for potential defaults on loans, decreased by 23.5% in the second quarter compared to the previous year, amounting to €166 million. The bank made additional provisions of €38 million for healthy loans, while provisions of €204 million were made for doubtful loans. This provision comes at a time when some banks have had to account for losses related to the difficulties faced by the Casino group, despite reaching an agreement with its buyers and key creditors.

Words of the day

profit : bénéfice

revenue : revenu