Societe Generale: Results at 30 June 2020
RESULTS AT JUNE 30TH 2020 |
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Press releaseParis, August 3rd 2020
Q2 20 AND H1 20 PERFORMANCE MARKED BY
THE COVID CRISIS; REBOUND FROM MID-MAYFrench Retail Banking and
International Retail Banking activities impacted in the first half
of Q2 20; rebound from mid-MayResilient activities in Insurance,
Private Banking and Transaction BankingGood performance in
Financing & Advisory and Fixed Income & Currencies; ongoing
unfavourable market conditions for structured products in April and
May and gradual recovery from mid-MayNon-cash exceptional items
related to the review of the trajectory of Global Markets &
Investor Services: impairment of goodwill for EUR -684m and
deferred tax assets for EUR -650mGroup net income of EUR -1,264m in
Q2 20 (EUR -1,590m in H1 20) and Group net income restated for
non-cash exceptional items of EUR +70m in Q2 20
SHARP DECLINE IN COSTSDecline in operating
expenses of -9.6% in Q2 20 and -5.8% in H1 20, reinforcing the
objective of underlying operating expenses of EUR 16.5bn in
2020 Objective to decrease costs in the medium term
HALF OF THE COST OF RISK IMPACTED BY IFRS9
EFFECTS AND COUNTERPARTY RATING DOWNGRADESNet cost of risk of
EUR 1,279m in Q2 20 (x4 vs. Q2 19), including EUR 653m related to
provisions for expected credit losses in Stage 1 and Stage 2; Cost
of risk at 81 basis points in H1 20 2020 cost of risk expected
to be at the low end of the 70 to 100 basis points range
SOLID CAPITAL AND LIQUIDITY POSITION CET1
ratio of 12.5%(1) (12.6% pro-forma(2)) at June 30th 2020, i.e.
nearly 350 basis points above the regulatory requirement 81% of the
financing programme achieved; LCR of 167%(3)CET1 ratio expected
to be at the high-end of the 11.5% to 12% range at end-2020
FINALISATION OF THE STRATEGIC REVIEW OF
STRUCTURED PRODUCTSMaintain a global leadership position in
Equity structured products, recognised by our clients, and reduce
the associated risk profile; improving the profitability of Global
Markets through a reduction in costs of around EUR 450 million by
2022-2023
Frédéric Oudéa, the Group’s Chief Executive
Officer, commented: “During the first half of 2020, Societe
Generale successfully adapted to the consequences of the health
crisis and was therefore able to effectively support its customers
and employees, thereby strengthening its position as a trusted
partner. While April and May were heavily impacted by the reduction
in activity of numerous economies around the world, the rebound in
activities from mid-May is very encouraging. Drawing on a very
solid capital base and a loan portfolio confirming its intrinsic
quality, the Group will continue to adapt its activities to the new
post-COVID crisis environment, extending in particular the efforts
to reduce costs. The Group is already working on new initiatives to
build its next strategic stage (2021-2023) focused around three
priority objectives, customer centricity, corporate social
responsibility and operational efficiency based on digital
technologies.”
1. GROUP
CONSOLIDATED RESULTS
In
EURm |
Q2 20 |
Q2 19 |
Change |
H1 20 |
H1 19 |
Change |
Net banking income |
5,296 |
6,284 |
-15.7% |
-13.5%* |
10,466 |
12,475 |
-16.1% |
-14.2%* |
Operating expenses |
(3,860) |
(4,270) |
-9.6% |
-7.7%* |
(8,538) |
(9,059) |
-5.8% |
-4.0%* |
Underlying operating expenses(2) |
(3,984) |
(4,152) |
-4.0% |
-2.0% |
(8,185) |
(8,500) |
-3.7% |
-1.8% |
Gross operating income |
1,436 |
2,014 |
-28.7% |
-25.9%* |
1,928 |
3,416 |
-43.6% |
-41.6%* |
Underlying gross operating income(1) |
1,312 |
2,132 |
-38.5% |
-36.2% |
2,281 |
3,975 |
-42.6% |
-40.9% |
Net cost of risk |
(1,279) |
(314) |
x 4.1 |
x 4.1* |
(2,099) |
(578) |
x 3.6 |
x 3.7* |
Operating income |
157 |
1,700 |
-90.8% |
-90.4%* |
(171) |
2,838 |
n/s |
n/s |
Underlying operating income(1) |
33 |
1,836 |
-98.2% |
-98.2% |
182 |
3,415 |
-94.7% |
-94.6% |
Net profits or losses from other assets |
4 |
(80) |
n/s |
n/s |
84 |
(131) |
n/s |
n/s |
Underlying net profits or losses from other assets(1) |
4 |
4 |
+0.0% |
-0.8% |
161 |
6 |
x 26 |
x 80.3 |
Impairment losses on goodwill |
(684) |
0 |
n/s |
n/s |
(684) |
0 |
n/s |
n/s |
Income tax |
(658) |
(390) |
+68.7% |
-69.4%* |
(612) |
(645) |
-5.1% |
+3.0%* |
Reported Group net income |
(1,264) |
1,054 |
n/s |
n/s |
(1,590) |
1,740 |
n/s |
n/s |
Underlying Group net income(1) |
8 |
1,247 |
-99.3% |
-99.4% |
0 |
2,332 |
-100.0% |
n/s |
ROE |
-10.9% |
6.9% |
|
|
-7.2% |
5.5% |
|
|
ROTE |
-6.5% |
8.3% |
|
|
-5.3% |
6.9% |
|
|
Underlying ROTE (1) |
-1.3% |
9.7% |
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-1.3% |
9.1% |
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(1) Adjusted for exceptional
items and linearisation of IFRIC 21
Societe Generale’s Board of Directors, which met
on July 31st, 2020 under the chairmanship of Lorenzo Bini Smaghi,
examined the Societe Generale Group’s results for Q2 and H1
2020.
The various restatements enabling the transition
from underlying data to published data are presented in the
methodology notes (section 10.5).
Net banking incomeQ2 2020 was heavily
impacted by the Covid-19 global health crisis and its economic
consequences. As a result, the Group’s net banking income was down
-15.7% vs. Q2 19. It was down -16.1% in H1 20 vs. H1 19.
Marked by the lockdown in April and May and the
recovery in activity from mid-May, French Retail Banking’s net
banking income (excluding PEL/CEL provision) was down -13.5% vs. Q2
19 (-10.8% excluding adjustment for tax related to commissions of
EUR +61 million in Q2 19) and -7.5% vs. H1 19.
International Retail Banking & Financial
Services saw revenues fall by -10.8%* vs. Q2 19 and -4.7%* vs. H1
19. International Retail Banking revenues were 8.9%* lower in Q2
20, reflecting a significant decline in activity in April and May
and a rebound in June. Insurance revenues were down -7.9% (-7.1%*)
vs. Q2 19 given the unfavourable conditions in the financial
markets, while Financial Services to Corporates’ revenues were down
-20.9% (-17.7%*) vs. Q2 19.
Global Banking & Investor Solutions’ net
banking income fell by -17.0% in Q2 and by -22.2% in H1 in an
exceptional market environment that impacted Global Markets’
revenues.
Operating expensesOperating expenses
declined -9.6% in Q2 20 vs. Q2 19, to EUR 3,860 million, and -5.8%,
to EUR 8,538 million in H1 20. Underlying costs came to EUR 3,984
million in Q2 20 and EUR 8,185 million in H1 20.
All the businesses saw substantially lower costs
in Q2 20: -8.5% in French Retail Banking, -7%* in International
Retail Banking & Financial Services and -18.0% in Global
Banking & Investor Solutions (-9.2% when restated for the
restructuring provision recorded in Q2 19 for EUR 227 million and
the increase in the resolution fund of EUR +38 million in Q2
20).
The trend was also downward in H1 20: -5.3% in
French Retail Banking, -2.0%* in International Retail Banking &
Financial Services and -10.0% in Global Banking & Investor
Solutions.
Underlying operating expenses are expected of
around EUR 16.5 billion in 2020.
Cost of risk
The Group’s commercial cost of risk (expressed
as a fraction of outstanding loans) amounted to 97 basis points in
Q2 20, higher than in Q1 20 (65 basis points) and Q2 19 (25 basis
points), or EUR 1,279 million. The net cost of risk in respect of
loans classified in Stage 1 (performing) and Stage 2
(underperforming) amounted to EUR 653 million including EUR 490
million for the impact related to the review of macro-economic
scenarios on the estimate of credit losses.
French Retail Banking’s cost of risk amounted to
85 basis points. The cost of risk of International Retail Banking
& Financial Services and Global Banking & Investor
Solutions came to 125 basis points and 95 basis points
respectively.
The commercial cost of risk stood at 81 basis
points in H1 20 and is expected to be at the bottom of the range of
between 70 to 100 basis points for 2020.
The gross doubtful outstandings ratio amounted
to 3.2%(1) at June 30th 2020, and 3.1% at March 31st 2020. The
Group’s gross coverage ratio for doubtful outstandings stood at
54%(2) at June 30th 2020 (55% at March 31st 2020).
Net profits or losses from other assets
Net profits or losses from other assets totalled EUR +4 million in
Q2 20 and EUR +84 million in H1 20, including EUR -77 million
related to the application of IFRS 5 as part of the implementation
of the Group’s refocusing plan in Q1 20.
Impairment loss on goodwill/Income
tax
The Group recorded two non-cash exceptional items
due to the review of the financial trajectory of Global Markets
& Investor Services: a EUR -684 million expense in respect of
the goodwill impairment of the Global Markets & Investor
Services CGU and a EUR -650 million expense in respect of the
impairment of deferred tax assets.
Group net income
In
EURm |
Q2
20 |
Q2
19 |
H1
20 |
H1
19 |
Reported Group net income |
(1,264) |
1 054 |
(1,590) |
1,740 |
Underlying Group net income(1) |
8 |
1,247 |
0 |
2,332 |
In
% |
Q2
20 |
Q2
19 |
S1-20 |
S1-19 |
ROTE (reported) |
-6.5% |
8.3% |
-5.3% |
6.9% |
Underlying ROTE(1) |
-1.3% |
9.7% |
-1.3% |
9.1% |
Earnings per share is negative and amounts to
EUR -2.25 in H1 20 (EUR 1.69 in H1 19). Underlying earnings per
share comes to EUR -0.38 over the same period.
2. THE GROUP’S
FINANCIAL STRUCTURE
Group shareholders’ equity totalled EUR
60.7 billion at June 30th, 2020 (EUR 63.5 billion at December 31st,
2019). Net asset value per share was EUR 61.8 and tangible net
asset value per share was EUR 54.3.
The consolidated balance sheet totalled EUR
1,453 billion at June 30th, 2020 (EUR 1,356 billion at December
31st, 2019). The net amount of customer loan outstandings at June
30th, 2020, including lease financing, was EUR 447 billion (EUR 430
billion at December 31st, 2019) – excluding assets and securities
purchased under resale agreements. At the same time, customer
deposits amounted to EUR 440 billion, vs. EUR 410 billion at
December 31st, 2019 (excluding assets and securities sold under
repurchase agreements).
At end-June 2020, the parent company had issued
EUR 21.5 billion of medium/long-term debt, having an average
maturity of 5.7 years and an average spread of 61 basis points (vs.
the 6-month mid-swap, excluding subordinated debt). The
subsidiaries had issued EUR 551 million. At June 30th, 2020,
the Group had issued a total of EUR 22 billion of medium/long-term
debt. The LCR (Liquidity Coverage Ratio) was well above regulatory
requirements at 180% at end-Juin 2020, vs. 119% at end-December
2019. At the same time, the NSFR (Net Stable Funding Ratio) was
over 100% at end-June 2020.
The Group’s risk-weighted assets (RWA)
amounted to EUR 360.7 billion at June 30th, 2020 (vs. EUR
345.0 billion at end-December 2019) according to CRR/CRD4 rules.
Risk-weighted assets in respect of credit risk represent 80.9% of
the total, at EUR 291.9 billion, up 3.3% vs. December 31st,
2019.
At June 30th, 2020, the Group’s Common Equity
Tier 1 ratio stood at 12.5% (12.6% pro forma for the announced
disposal amounting to 10 basis points), i.e. 350 basis points above
the regulatory requirement of 9.05% as at June 30th, 2020. This
ratio includes an effect of +20 basis points for phasing of the
IFRS 9 impact. Excluding this effect, the ratio amounts to 12.3%.
The Tier 1 ratio stood at 14.6% at end-June 2020 (15.1% at
end-December 2019) and the total capital ratio amounted to 17.7%
(18.3% at end-December 2019). All of the effects in Q2 20 are
presented in Appendix 10.
The CET1 ratio is expected to be at the top of the
range of between 11.5% and 12% at end-2020.
With a level of 28.5%(1) of RWA and 8.2%(1) of
leveraged exposure at end-June 2020, the Group’s TLAC ratio is
above the FSB’s requirements for 2022. At June 30th, 2020, the
Group was also above its MREL requirements of 8.51% of the TLOF(2)
(which, in December 2017, represented a level of 24.4% of RWA),
which were used as a reference for the SRB calibration.
The leverage ratio stood at 4.2%(3) at
June 30th, 2020 (4.3% at end-December 2019).
The Group is rated by four rating agencies: (i)
FitchRatings - long-term rating “A-”, rating watch stable, senior
preferred debt rating “A”, short-term rating “F1”; (ii) Moody’s –
long-term rating (senior preferred debt) “A1”, stable outlook,
short-term rating “P-1”; (iii) R&I - long-term rating (senior
preferred debt) “A”, stable outlook; and (iv) S&P Global
Ratings - long-term rating (senior preferred debt) “A”, negative
outlook, short-term rating “A-1”.
3. FRENCH RETAIL
BANKING
In
EURm |
Q2
20 |
Q2
19 |
Change |
H1
20 |
H1
19 |
Change |
Net banking income |
1,754 |
1,994 |
-12.0% |
3,634 |
3,910 |
-7.1% |
Net banking income excl. PEL/CEL |
1,749 |
2,021 |
-13.5% |
3,654 |
3,949 |
-7.5% |
Operating expenses |
(1,233) |
(1,348) |
-8.5% |
(2,683) |
(2,834) |
-5.3% |
Gross operating income |
521 |
646 |
-19.3% |
951 |
1,076 |
-11.6% |
Gross operating income excl. PEL/CEL |
516 |
673 |
-23.3% |
971 |
1,115 |
-12.9% |
Net cost of risk |
(442) |
(129) |
+242.6% |
(691) |
(223) |
+209.9% |
Operating income |
79 |
517 |
-84.7% |
260 |
853 |
-69.5% |
Net profits or losses from other assets |
5 |
1 |
+400,0% |
136 |
2 |
x 68 |
Reported Group net income |
60 |
356 |
-83.1% |
279 |
590 |
-52.7% |
RONE |
2.1% |
12.6% |
|
4.9% |
10.5% |
|
Underlying RONE (1) |
1.4% |
1.4% |
|
6.0% |
11.5% |
|
(1) Adjusted for the
linearisation of IFRIC 21 and PEL/CEL provision
After the substantial impact of the lockdown on
activity in April and May, French Retail Banking’s commercial
performance improved from mid-May.
Customers substantially reduced their activity
during April and May: accordingly, the level of bank card
transactions and corporate credit transfers during this period was
well below the average level observed in Q2 2019. Loan production
was focused in particular on State Guaranteed Loans (PGE), with a
slowdown in production on other categories. Customer activity
gradually picked up from mid-May, which resulted in the level of
bank card transactions and corporate credit transfers in June close
to the monthly average levels in Q2 19.
The networks continued to develop their digital
offer in Q2. Societe Generale expanded its offering for
Professional and VSE customers, with the acquisition of Shine, the
neobank for entrepreneurs. It also launched the third
generation of its digital application.
Boursorama consolidated its position as the
leading online bank in France, with around 2.37 million clients at
end-June 2020 and provided further evidence of the agility of its
online banking model with a comprehensive offering. In a crisis
environment, the commercial momentum remained robust. Boursorama’s
contribution to Group net income was positive in Q2, driven by a
decline in acquisition costs and a record activity in stock market
activity.
Net inflow for wealthy clients remained robust
at EUR 1.1 billion in Q2 (EUR 1.6 billion in H1), taking assets
under management to EUR 67.3 billion (including Crédit du Nord) at
end-June 2020. Life insurance outstandings totalled EUR 93 billion,
with the unit-linked share accounting for 26% of outstandings.The
networks continued to develop their insurance business, with a
penetration rate of 21.6% on Personal Protection and 9.8% on
Property/Casualty insurance.
Average investment loan outstandings (including
leases), largely bolstered by State Guaranteed Loans, rose 16.7%
vs. Q2 19 to EUR 81.2 billion (+8.5% excluding State Guaranteed
Loans).Average outstanding loans to individuals were up 7.4% at EUR
122.3 billion: after a sharp decline in consumer and housing loan
production in April and May, production was strong from mid-May. As
a result, average loan outstandings climbed 11.2% (+8.3% excluding
PGE) vs. Q2 19 to EUR 216.0 billion.
Average outstanding balance sheet deposits(1)
were 11.3% higher than in Q2 19 at EUR 228.7 billion, still driven
by sight deposits (+18.3% vs. Q2 19)(2).As a result, the average
loan/deposit ratio stood at 94% in Q2 20 (stable vs. Q2 19).
In this exceptional period, French Retail
Banking is fully supporting the economy, accompanying individual,
corporate and professional customers. The Group was extremely
reactive in setting up the State Guaranteed Loan (PGE). As of July
24th, around 86,100 applications had been received for a total
amount of EUR 19 billion at Group level.
Net banking income excluding PEL/CEL
Q2 20: revenues (excluding PEL/CEL)
totalled EUR 1,749 million, heavily impacted by the effects of the
lockdown on customer activity (-13.5% vs. Q2 19; -10.8% excluding
adjustment for tax related to commissions of EUR +61 million in Q2
19).Net interest income (excluding PEL/CEL) was 6.0% lower than in
Q2 19 with, in particular, a significant increase in deposits
adversely affecting the margin in a low interest rate
environment.Commissions were 14% lower than in Q2 19 (-7.6%
excluding adjustment tax related to commissions in Q2 19), driven
by the sharp fall in service commissions (-11.6% excluding
adjustment for tax related to commissions in Q2 19) against the
backdrop of the lockdown, despite the increase in financial
commissions (+8.1% vs. Q2 19).“Other revenues” were lower in Q2
(-71% vs. Q2 19) with, in particular, the impact of the non-payment
of Crédit Logement dividends.
H1 20: after a dynamic first few months,
revenues were impacted by the effects of Covid-19 and the lockdown
measures: revenues (excluding PEL/CEL) totalled EUR 3,654 million,
down -7.5% vs. H1 19 and -6.0% excluding adjustment for tax related
to commissions of EUR +61 million in H1 19. Net interest income
(excluding PEL/CEL) was 2.4% lower than in H1 19. Commissions were
down -8.4% vs. H1 19 (-5.0% excluding adjustment for tax related to
commissions in H1 19), with the sharp fall in service commissions
against the backdrop of the lockdown more than offsetting the
strong increase in financial commissions.
Operating expenses
Q2 20: operating expenses were
substantially lower at EUR 1,233 million (-8.5% vs. Q2 19),
illustrating the Group’s work to reduce costs despite the increase
in regulatory costs. The cost to income ratio (after linearisation
of the IFRIC 21 charge and restated for the PEL/CEL provision)
stood at 71.9%.
H1 20: operating expenses were lower at
EUR 2,683 million (-5.3% vs. H1 19). The cost to income ratio
(after linearisation of the IFRIC 21 charge and restated for the
PEL/CEL provision) stood at 71.6%.
Cost of risk
Q2 20: the commercial cost of risk
amounted to EUR 442 million or 85 basis points, substantially
higher than in Q2 19 (27bp) and Q1 20 (49bp). It includes EUR 266
million of S1/S2 (performing/underperforming loans) provisioning
and EUR 176 million of S3 (non-performing loans) provisioning.
The inclusion of new macro-economic scenarios in accordance
with the application of IFRS 9 contributed EUR 179 million to S1/S2
provisioning.
H1 20: the commercial cost of risk
amounted to EUR 691 million or 68 basis points, substantially
higher than in H1 19 (23bp).
Net profits or losses from other
assets
Q2 20: “Net profits or losses from other
assets” amounted to EUR 5 million.
H1 20: “Net profits or losses from other
assets” amounted to EUR 136 million including a capital gain of EUR
130 million relating to the Group's property disposal programme
carried out in Q1 2020.
Contribution to Group net income
Q2 20: the contribution to Group net
income totalled EUR 60 million (-83.1% vs. Q2 19). RONE (after
linearisation of the IFRIC 21 charge and restated for the PEL/CEL
provision) stood at 1.4% in Q2 20 (vs. 12.6% in Q2 19).
H1 20: the contribution to Group net
income totalled EUR 279 million (-52.7% vs. H1 19). RONE (after
linearisation of the IFRIC 21 charge and restated for the PEL/CEL
provision) stood at 6.0% in H1 20 (vs. 11.5% in H1 19).
4. INTERNATIONAL
RETAIL BANKING & FINANCIAL SERVICES
In EURm |
Q2
20 |
Q2
19 |
Change |
H1
20 |
H1
19 |
Change |
Net banking income |
1,750 |
2,124 |
-17.6% |
-10.8%* |
3,714 |
4,200 |
-11.6% |
-4.7%* |
Operating expenses |
(979) |
(1,145) |
-14.5% |
-7.0%* |
(2,125) |
(2,349) |
-9.5% |
-2.0%* |
Gross operating income |
771 |
979 |
-21.2% |
-15.1%* |
1,589 |
1,851 |
-14.2% |
-8.0%* |
Net cost of risk |
(418) |
(133) |
x 3.1 |
x 3.3* |
(647) |
(261) |
x 2.5 |
x 2.5* |
Operating income |
353 |
846 |
-58.3% |
-54.8%* |
942 |
1,590 |
-40.8% |
-36.1%* |
Net profits or losses from other assets |
(1) |
0 |
n/s |
n/s |
11 |
1 |
x 11.0 |
n/s |
Reported Group net income |
226 |
515 |
-56.1% |
-51.6%* |
591 |
979 |
-39.6% |
-33.7%* |
RONE |
8.4% |
18.6% |
|
|
11.0% |
17.3% |
|
|
Underlying RONE (1) |
7.9% |
18.9% |
|
|
11.6% |
18.2% |
|
|
(1) Adjusted
for the linearisation of IFRIC 21 and the restructuring provision
of EUR 29 million Q2 19.
In International Retail Banking,
outstanding loans totalled EUR 85.8 billion. They rose +3.2%* vs.
end-June 2019 when adjusted for changes in Group structure and at
constant exchange rates. They were down -6.4% at current structure
and exchange rates, given the disposals finalised since June 2019
(SKB in Slovenia, Societe Generale Montenegro, Societe Generale
Serbia, Mobiasbanca in Moldova, OBSG in Macedonia and Societe
Generale de Banque aux Antilles). April and May were heavily
impacted by the lockdown due to Covid-19, but there was a rebound
in activity from June. Outstanding deposits climbed +7.1%* (-4.0%
at current structure and exchange rates) vs. June 2019 to EUR 80.3
billion, with a healthy momentum in all regions.
For the Europe scope, outstanding loans were up
+3.2%* vs. Q2 19, at EUR 53.6 billion (-9.2% at current structure
and exchange rates), driven by Western Europe (+3.7%) and the Czech
Republic (+3.4%*, -1.6%). Outstanding deposits were up +5.4%*
(-10.0% at current structure and exchange rates), with a healthy
momentum in the Czech Republic (+6.7%*, +1.5%) and Romania (+4.9%*,
+2.6%).
In Russia, outstanding loans rose +1.6%* at
constant exchange rates (-7.1% at current exchange rates) while
outstanding deposits climbed +11.3%* (+3.5% at current exchange
rates).
In Africa, Mediterranean Basin and French
Overseas Territories, activity remained generally buoyant,
especially in Sub-Saharan Africa. Outstanding loans rose +4.0%* (or
+1.5%) vs. Q2 19. Outstanding deposits enjoyed a strong momentum,
up +8.2%* (+6.1%).
In the Insurance business, the life
insurance savings business saw outstandings increase +1.8%*
vs. Q2 19. The share of unit-linked products in outstandings
was 30% at end-June 2020, up 1.9 points vs. Q2 19. Protection
insurance fell -3.2%* vs. Q2 19. The 6.1%* increase in
Property/Casualty premiums was offset by a decline in personal
Protection insurance (-8.5%* vs. Q2 19), where a rebound was
observable from June.
Financial Services to Corporates
delivered a resilient commercial performance. Operational
Vehicle Leasing and Fleet Management saw an increase in its vehicle
fleet (+3.8% vs. the end-June 2019) to 1.76 million vehicles at
end-June 2020. Equipment Finance’s outstanding loans were stable*
vs. end-June 2019, at EUR 17.7 billion (excluding factoring).
Net banking income
Net banking income amounted to EUR 1,750 million
in Q2 20, down -10.8%* (-17.6%) vs. Q2 19. Revenues totalled EUR
3,714 million in H1 20, down -4.7%* (-11.6%) vs. H1 19.
In International Retail Banking, net
banking income totalled EUR 1,157 million in Q2 20, down -8.9%*
(-18.1%) vs. Q2 19, marked by a fall in commissions due to the
reduced activity in the lockdown environment and the impact of the
decline in rates on net interest margin in the Czech Republic,
Romania and Russia. In Africa, Mediterranean Basin and French
Overseas Territories, revenues include an impact of EUR -31 million
related to repayment moratoriums in Tunisia.Net banking income
amounted to EUR 2,450 million in H1 20, down -3.1%* excluding the
structure and exchange rate effects (-12.5%) vs. H1 19.
The Insurance business saw net banking
income decrease by -7.1%* to EUR 211 million in Q2 20 (-7.9%),
marked by a decline in financial margins in an unfavourable
environment in the financial markets. When adjusted for the
contribution to the Solidarity Fund in France, it was 4.7%* lower
than in Q2 19. Net banking income fell -3.9%* (-4.3%) in H1 20, to
EUR 440 million.
Financial Services to Corporates’ net
banking income was down -17.7%* (-20.9%) vs. Q2 19 at EUR 382
million. ALD revenues included EUR 30 million of additional
impairments on residual values and EUR 9.6 million of impairments
on used vehicles in Q2 20. When restated for these items, Financial
Services to Corporates’ revenues were down -8.2%*. Financial
Services to Corporates’ net banking income totalled EUR 824 million
in H1 20, down -9.5%* (-12.4%) vs. H1 19.
Operating expenses
Operating expenses were down -7.0%* (-14.5%), at
EUR -979 million, vs. Q2 19, which included a restructuring
provision related to the simplification of the head office
structure amounting to EUR 29 million. When restated for this
provision, operating expenses were down -4.3%* vs. Q2 19,
reflecting rigorous cost control. They fell -2.0%* (-9.5%) in the
first six months, to EUR 2,125 million. The cost to income ratio
stood at 55.9% in Q2 20 and 57.2% in H1 20.
In International Retail Banking,
operating expenses were down -2.9%* (-12.8%) vs. Q2 19 and were
stable* (-9.7%) vs. H1 19.
In the Insurance business, operating
expenses rose +4.2%* (+3.7%) vs. Q2 19 to EUR 84 million and +4.0%*
(+3.8%) vs. H1 19.
In Financial Services to Corporates,
operating expenses were down -8.6%* (-12.6%) vs. Q2 19 and -3.0%*
(-7.1%) vs. H1 19.
Cost of risk
Q2 20: the commercial cost of risk
amounted to 125 basis points (or EUR 418 million), vs. 38 basis
points in Q2 19, which included net provision write-backs in the
Czech Republic and Romania, and 67 basis points in Q1 20. The Q2
cost of risk includes EUR 144 million for the estimate of expected
credit losses in Stage 1 and Stage 2, including EUR 135 million for
the impact related to the review of macro-economic scenarios.H1
20: the cost of risk stood at 96 basis points (EUR 647
million). It was 39 basis points in H1 19.
Contribution to Group net income
The contribution to Group net income totalled
EUR 226 million in Q2 20 (-56.1%* vs. Q2 19) and EUR 591 million in
H1 20 (-39.6%* vs. H1 19). Underlying RONE stood at 7.9% in Q2 20,
vs. 18.9% in Q2 19, and 11.6% in H1 20, vs. 18.2% in H1 19.
5. GLOBAL BANKING
& INVESTOR SOLUTIONS
In
EURm |
Q2
20 |
Q2
19 |
Change |
H1
20 |
H1
19 |
Change |
Net banking income |
1,880 |
2,266 |
-17.0% |
-17.3%* |
3,507 |
4,505 |
-22.2% |
-22.7%* |
Operating expenses |
(1,570) |
(1,915) |
-18.0% |
-18.2%* |
(3,547) |
(3,941) |
-10.0% |
-10.3%* |
Gross operating income |
310 |
351 |
-11.7% |
-12.4%* |
(40) |
564 |
n/s |
n/s |
Net cost of risk |
(419) |
(33) |
x 12.7 |
x 13.0* |
(761) |
(75) |
x 10.1 |
x 10.1* |
Operating income |
(109) |
318 |
n/s |
n/s |
(801) |
489 |
n/s |
n/s |
Reported Group net income |
(67) |
274 |
n/s |
n/s |
(604) |
414 |
n/s |
n/s |
RONE |
-1.9% |
7.1% |
|
|
-8.6% |
5.2% |
|
|
Underlying RONE (1) |
-3.3% |
10.0% |
|
|
-6.2% |
8.9% |
|
|
(1) Adjusted for the
linearisation of IFRIC 21
Finalisation of the strategic review of
structured products in Global Markets
The Group has finalised the strategic review
carried out in Global Markets on structured products and has set
three priorities:
- Maintaining its global leadership role in equity structured
products and remaining a major player in investment solutions
- Reducing the risk profile on equity and credit structured
products in order to decrease the sensitivity of Global Markets’
revenues to market dislocations. This refocusing will have an
impact on revenues of between EUR -200 million and EUR -250
million
- Improving the profitability of Global Markets by reducing the
breakeven point through a net cost reduction of around EUR -450
million by 2022-2023.
Net banking incomeQ2 20: Global
Banking & Investor Solutions’ revenues were down -17.0% at EUR
1,880 million.H1 20: when adjusted for the impact of
restructuring (activities in the process of being closed or scaled
back) completed last year, the revaluation of SIX securities (EUR
+66 million in H1) and the disposal of Private Banking in Belgium,
net banking income was down -18.7% vs. H1 19 (and -22.2% on a
reported basis).
In Global Markets & Investor
Services, net income banking totalled EUR 991 million, down
-28.1% vs Q2 19 adjusted for restructuring.In H1 20, when adjusted
for restructuring and the revaluation of SIX securities (EUR +34
million in Q1 19), revenues were down -30.8% vs. H1 19.
Fixed Income & Currencies enjoyed an very
good Q2, in all regions. When restated for the impact of
restructuring, revenues amounted to EUR 700 million and were
substantially higher (+38.1%) than in Q2 19. They were driven by
the healthy commercial momentum, particularly in financing, and by
the exceptional number of primary issues. Flow activities (rates
and credit) and emerging market activities continued to benefit
from favourable market conditions. The Americas region performed
particularly well in Q2 20.In H1 20, revenues restated for
restructuring were up +43.6% at EUR 1,309 million.
Equity net banking income declined by -79.5% vs.
Q2 19. In April and May, structured product activities
continued to be impacted by the cancellation of dividend payments
(loss of EUR 200 million), a still strong correlation and strict
production constraints. These activities saw a gradual recovery
from mid-May. Listed product revenues were significantly higher
than in Q2 19, driven by flow investment solutions (notably due to
EMC activities integration). This increase, combined with the
strong performance of equity flow activities, was not enough to
offset the losses recorded on structured products at the beginning
of the quarter.
Securities Services’ assets under custody
amounted to EUR 4,238 billion at end-June 2020, up +3.1% vs.
end-March 2020. Over the same period, assets under administration
were up +3.5% at EUR 599 billion. Securities Services’ revenues
totalled EUR 149 million in Q2 20, in line with Q1 20. They were
down -16.8% vs. a strong Q2 19.
Financing & Advisory revenues
totalled EUR 657 million in Q2 20, up +2.0% vs. Q2 19. They
amounted to EUR 1,286 million in H1 20, slightly lower (-1.1%) than
in H1 19.Investment banking enjoyed an excellent quarter, driven by
a record number of issues in the debt capital markets and buoyant
acquisition financing activity. The Group therefore strengthens its
leadership position in the European market. Financing activities
proved resilient in this environment impacted by the crisis.
New business remained stable. After a challenging Q1, the Asset
Backed Products platform delivered a good performance in Q2,
against the backdrop of a stabilisation in the market environment.
Global Transaction and Payment Services proved resilient in light
of the crisis and a significant decline in volumes.
Asset and Wealth Management’s net banking
income totalled EUR 232 million in Q2 20, slightly higher (+0.4%)
than in Q2 19.In H1 20, when adjusted in Q1 19 for the revaluation
of SIX securities (EUR +32 million) and for the disposal of Private
Banking in Belgium, net banking income was 2.9% higher.
Private Banking posted a robust performance in
Q2 20, driven by good transactional revenues in France and positive
net inflow. Net banking income amounted to EUR 187 million in
Q2 20, up +6.9% vs. Q2 19 (and +6.3% vs. Q1 20). Assets under
management increased by +2.4% vs. March 2020, to EUR 114
billion.Private Banking posted net inflow of EUR 1.5 billion in H1
20, driven by France. Net banking income amounted to EUR 363
million in H1 20, up +5.5% vs. H1 19, when adjusted for the
disposal of Private Banking in Belgium and the revaluation of SIX
securities.
Lyxor posted a performance down -21.6% in Q2 20,
impacted by the challenging market conditions. Lyxor’s assets under
management totalled EUR 132 billion at end-June 2020, an increase
of +5.1% vs. March 2020. Lyxor is the first provider to launch an
ETF ecosystem to tackle climate change, which further strengthens
its leadership status in the Green Bonds segment.Revenues were 5.3%
lower in H1 20 than in H1 19, impacted by market effects on equity
indices.
Operating expensesQ2 20: when
restated for the increase in the resolution fund (EUR +38 million)
and the restructuring provision, recorded in Q2 19 for EUR 227
million, operating expenses were down -9.2% vs. Q2 19. H1
20: restated operating expenses were down -6.8%.
Net cost of riskQ2 20: the
commercial cost of risk amounted to 95 basis points (or EUR 419
million), vs. 87 basis points in Q1 20 and 8 basis points in Q2 19.
The Q2 cost of risk includes EUR 240 million related to Stages 1
and 2 (with EUR 176 million related to the review of macro-economic
scenarios on the estimate of credit losses) and EUR 178 million
related to Stage 3.H1 20: the cost of risk amounted to 91
basis points (EUR 761 million).
Contribution to Group net incomeThe
contribution to Group net income amounted to EUR -67 million in Q2
20 and to EUR -604 million in H1 20. Underlying RONE is negative on
H1 20.
6. CORPORATE
CENTRE
In EURm |
Q2
20 |
Q2
19 |
H1
20 |
H1
19 |
Net banking income |
(88) |
(100) |
(389) |
(140) |
Operating expenses |
(78) |
138 |
(183) |
65 |
Gross operating income |
(166) |
38 |
(572) |
(75) |
Net cost of risk |
- |
(19) |
- |
(19) |
Net profits or losses from other assets |
- |
(81) |
(77) |
(134) |
Impairment losses on goodwill |
(684) |
- |
(684) |
- |
Income tax |
(598) |
7 |
(450) |
63 |
Reported Group net income |
(1,483) |
(91) |
(1,856) |
(243) |
The Corporate Centre includes:
- the property management of the Group’s head office,
- the Group’s equity portfolio,
- the Treasury function for the Group,
- certain costs related to cross-functional projects and certain
costs incurred by the Group and not re-invoiced to the
businesses.
The Corporate Centre’s net banking income
totalled EUR -88 million in Q2 20 vs. EUR -100 million in Q2 19 and
EUR -389 million in H1 20 vs. EUR -140 million in H1 19.
Operating expenses totalled EUR -78 million in
Q2 20 vs. EUR +138 million in Q2 19, which included an operating
tax adjustment for EUR +241 million. They amounted to EUR -183
million in H1 20 vs. EUR +65 million in H1 19.
Gross operating income totalled EUR -166 million
in Q2 20 vs. EUR +38 million in Q2 19 and EUR -572 million in H1 20
vs. EUR -75 million in H1 19.
Net profits or losses from other assets was nil
in Q2 20 and amounted to EUR -77 million in H1 20, related to the
application of IFRS 5 as part of the implementation of the Group’s
refocusing plan in Q1 20.
The review of the financial trajectory of Global
Markets & Investor Services resulted in the impairment of the
associated goodwill for EUR -684 million and deferred tax assets
for EUR -650 million. The Corporate Centre’s contribution to Group
net income was EUR -1,483 million in Q2 20 vs. EUR -91 million in
Q2 19 and EUR -1,856 million in H1 20 vs. EUR -243 million in H1
19.
7. CONCLUSION
During H1 20, Societe Generale demonstrated its
ability to absorb the impacts of the crisis due to the quality of
its asset portfolio and the robustness of its balance sheet with,
in particular, a capital level of 12.5%, or 350 basis points above
the regulatory requirement.
Drawing on this solid base, the Group will
continue to adapt its activities to the new post-COVID crisis
environment, particularly in structured products, as well as its
efforts to reduce costs in 2020 and in the medium term, through
structural initiatives.
Accordingly, in 2020 the Group anticipates:
- underlying costs of around EUR 16.5 billion, substantially
lower than in 2019 (EUR 17.4 billion)
- a cost of risk at the bottom of the range of between 70 to 100
basis points
- a CET1 ratio at the top of the range of between 11.5% and 12.0%
at end-2020
Finally, Societe Generale is already preparing
its 2021-2023 strategic plan based around its three priority
objectives:
- further improving its capacity to place the customer at the
centre of its activities
- ramping up our commitment in responsible finance to strengthen
its leadership position
- increasing operational efficiency with the support of digital
technologies
8. 2020 FINANCIAL
CALENDAR
2020 Financial communication calendar |
November 5th, 2020 Third quarter and nine-month 2020
results February 10th, 2021 Fourth quarter and FY 2020
resultsMay 6th, 2021 First quarter 2021 results August
3rd, 2021 Second quarter and first half 2021
resultsNovember 4th, 2021 Third quarter and nine-month
2021 results |
|
The Alternative Performance Measures, notably the notions of net
banking income for the pillars, operating expenses, IFRIC 21
adjustment, (commercial) cost of risk in basis points, ROE, ROTE,
RONE, net assets, tangible net assets, and the amounts serving as a
basis for the different restatements carried out (in particular the
transition from published data to underlying data) are presented in
the methodology notes, as are the principles for the presentation
of prudential ratios. This document contains
forward-looking statements relating to the targets and strategies
of the Societe Generale Group. These forward-looking statements are
based on a series of assumptions, both general and specific, in
particular the application of accounting principles and methods in
accordance with IFRS (International Financial Reporting Standards)
as adopted in the European Union, as well as the application of
existing prudential regulations.These forward-looking statements
have also been developed from scenarios based on a number of
economic assumptions in the context of a given competitive and
regulatory environment. The Group may be unable to:- anticipate all
the risks, uncertainties or other factors likely to affect its
business and to appraise their potential consequences;- evaluate
the extent to which the occurrence of a risk or a combination of
risks could cause actual results to differ materially from those
provided in this document and the related
presentation. Therefore, although Societe Generale believes
that these statements are based on reasonable assumptions, these
forward-looking statements are subject to numerous risks and
uncertainties, including matters not yet known to it or its
management or not currently considered material, and there can be
no assurance that anticipated events will occur or that the
objectives set out will actually be achieved. Important factors
that could cause actual results to differ materially from the
results anticipated in the forward-looking statements include,
among others, overall trends in general economic activity and in
Societe Generale’s markets in particular, regulatory and prudential
changes, and the success of Societe Generale’s strategic, operating
and financial initiatives. More detailed information on the
potential risks that could affect Societe Generale’s financial
results can be found in the Universal Registration Document filed
with the French Autorité des Marchés Financiers.Investors are
advised to take into account factors of uncertainty and risk likely
to impact the operations of the Group when considering the
information contained in such forward-looking statements. Other
than as required by applicable law, Societe Generale does not
undertake any obligation to update or revise any forward-looking
information or statements. Unless otherwise specified, the sources
for the business rankings and market positions are internal. |
9. APPENDIX 1:
FINANCIAL DATA
GROUP NET INCOME AFTER TAX BY CORE
BUSINESS
In EURm |
Q2
20 |
Q2
19 |
Change |
H1
20 |
H1
19 |
Change |
French Retail Banking |
60 |
356 |
-83.1% |
279 |
590 |
-52.7% |
International Retail Banking & Financial Services |
226 |
515 |
-56.1% |
591 |
979 |
-39.6% |
Global Banking & Investor Solutions |
(67) |
274 |
n/s |
(604) |
414 |
n/s |
Core Businesses |
219 |
1,145 |
-80.9% |
266 |
1,983 |
-86.6% |
Corporate Centre |
(1,483) |
(91) |
n/s |
(1,856) |
(243) |
n/s |
Group |
(1,264) |
1,054 |
n/s |
(1,590) |
1,740 |
n/s |
CONSOLIDATED BALANCE SHEET
|
30.06.2020 |
31.12.2019 |
Central banks |
144,417 |
102,311 |
Financial assets at fair value through profit or loss |
419,147 |
385,739 |
Hedging derivatives |
21,845 |
16,837 |
Financial assets measured at fair value through other comprehensive
income |
55,606 |
53,256 |
Securities at amortised cost |
14,877 |
12,489 |
Due from banks at amortised cost |
55,292 |
56,366 |
Customer loans at amortised cost |
458,500 |
450,244 |
Revaluation differences on portfolios hedged against interest rate
risk |
470 |
401 |
Investment of insurance activities |
163,219 |
164,938 |
Tax assets |
5,052 |
5,779 |
Other assets |
77,196 |
68,045 |
Non-current assets held for sale |
3,788 |
4,507 |
Investments accounted for using the equity method |
106 |
112 |
Tangible and intangible assets |
29,812 |
30,652 |
Goodwill |
4,045 |
4,627 |
Total |
1,453,372 |
1,356,303 |
|
30.06.2020 |
31.12.2019 |
Central banks |
2,980 |
4,097 |
Financial liabilities at fair value through profit or loss |
405,113 |
364,129 |
Hedging derivatives |
12,705 |
10,212 |
Debt securities issued |
136,261 |
125,168 |
Due to banks |
121,542 |
107,929 |
Customer deposits |
444,470 |
418,612 |
Revaluation differences on portfolios hedged against interest rate
risk |
8,629 |
6,671 |
Tax liabilities |
1,239 |
1,409 |
Other liabilities |
94,115 |
85,062 |
Non-current liabilities held for sale |
928 |
1,333 |
Liabilities related to insurance activities contracts |
140,701 |
144,259 |
Provisions |
4,348 |
4,387 |
Subordinated debts |
14,662 |
14,465 |
Total liabilities |
1,387,693 |
1,287,733 |
SHAREHOLDERS' EQUITY |
|
|
Shareholders' equity, Group share |
|
|
Issued common stocks, equity instruments and capital reserves |
30,115 |
31,102 |
Retained earnings |
32,457 |
29,558 |
Net income |
(1,590) |
3,248 |
Sub-total |
60,982 |
63,908 |
Unrealised or deferred capital gains and losses |
(323) |
(381) |
Sub-total equity, Group share |
60,659 |
63,527 |
Non-controlling interests |
5,020 |
5,043 |
Total equity |
65,679 |
68,570 |
Total |
1,453,372 |
1,356,303 |
10. APPENDIX 2: METHODOLOGY
1 – The financial information
presented in respect of Q2 and H1 2020 was examined by the Board of
Directors on July 31st, 2020 and has been prepared in accordance
with IFRS as adopted in the European Union and applicable at that
date. The limited review procedures carried out by the Statutory
Auditors are in progress on the condensed interim consolidated
financial statements as at June 30th, 2020.
2 – Net banking incomeThe pillars’ net
banking income is defined on page 43 of Societe Generale’s 2020
Universal Registration Document. The terms “Revenues” or “Net
Banking Income” are used interchangeably. They provide a normalised
measure of each pillar’s net banking income taking into account the
normative capital mobilised for its activity.
3 – Operating expensesOperating expenses
correspond to the “Operating Expenses” as presented in note 8.1 to
the Group’s consolidated financial statements as at December 31st,
2019 (pages 423 et seq. of Societe Generale’s 2020 Universal
Registration Document). The term “costs” is also used to refer to
Operating Expenses. The Cost/Income Ratio is defined on page 43 of
Societe Generale’s 2020 Universal Registration Document.
4 - IFRIC 21 adjustmentThe IFRIC 21
adjustment corrects the result of the charges recognised in the
accounts in their entirety when they are due (generating event) so
as to recognise only the portion relating to the current quarter,
i.e. a quarter of the total. It consists in smoothing the charge
recognised accordingly over the financial year in order to provide
a more economic idea of the costs actually attributable to the
activity over the period analysed.
5 – Exceptional items – Transition from
accounting data to underlying data
It may be necessary for the Group to present
underlying indicators in order to facilitate the understanding of
its actual performance. The transition from published data to
underlying data is obtained by restating published data for
exceptional items and the IFRIC 21 adjustment. Moreover, the Group
restates the revenues and earnings of the French Retail Banking
pillar for PEL/CEL provision allocations or write-backs. This
adjustment makes it easier to identify the revenues and earnings
relating to the pillar’s activity, by excluding the volatile
component related to commitments specific to regulated savings.
The reconciliation enabling the transition from
published accounting data to underlying data is set out in the
table below:
Q2 20 (in EURm) |
Operating Expenses |
Net cost of risk |
Net profit or losses from other assets |
Impairment losses on goodwill |
Income Tax |
Group net income |
Business |
Reported |
(3,860) |
(1,279) |
4 |
(684) |
(658) |
(1,264) |
|
(+) IFRIC 21 linearisation |
(124) |
|
|
|
58 |
(62) |
|
(-) Goodwill impairment* |
|
|
(684) |
|
(684) |
Corporate Centre |
(-) DTA impairment* |
|
|
|
(650) |
(650) |
Corporate Centre |
Underlying |
(3,984) |
(1,279) |
4 |
0 |
50 |
8 |
|
|
|
|
|
|
|
|
|
H1 20 (in EURm) |
Operating Expenses |
Net cost of risk |
Net profit or losses from other assets |
Impairment losses on goodwill |
Income Tax |
Group net income |
Business |
Reported |
(8,538) |
(2,099) |
84 |
(684) |
(612) |
(1,590) |
|
(+) IFRIC 21 linearisation |
353 |
|
|
|
(166) |
179 |
|
(-) Group refocusing plan* |
|
|
(77) |
|
0 |
(77) |
Corporate Centre |
(-) Goodwill impairment* |
|
|
(684) |
|
(684) |
Corporate Centre |
(-) DTA impairment* |
|
|
|
(650) |
(650) |
Corporate Centre |
Underlying |
(8,185) |
(2,099) |
161 |
0 |
(128) |
0 |
|
Q2 19 (in EURm) |
Operating Expenses |
Net cost of risk |
Net profit or losses from other assets |
Group net income |
Business |
Reported |
(4,270) |
(314) |
(80) |
1,054 |
|
(+) IFRIC 21 linearisation |
(138) |
|
|
(101) |
|
(-) Restructuring provision* |
(256) |
|
|
(192) |
GBIS (EUR -227m) / IBFS (EUR -29m) |
(-) Group refocusing plan* |
|
(18) |
(84) |
(102) |
Corporate Centre |
Underlying |
(4,152) |
(296) |
4 |
1,247 |
|
|
|
|
|
|
|
H1 19 (in EURm) |
Operating Expenses |
Net cost of risk |
Net profit or losses from other assets |
Group net income |
Business |
Reported |
(9,059) |
(578) |
(131) |
1,740 |
|
(+) IFRIC 21 linearisation |
303 |
|
|
222 |
|
(-) Restructuringprovision* |
(256) |
|
|
(192) |
GBIS (EUR -227m) / IBFS (EUR -29m) |
(-) Group refocusing plan* |
|
(18) |
(137) |
(177) |
Corporate Centre |
Underlying |
(8,500) |
(560) |
6 |
2,332 |
|
(*) exceptional item
6 - Cost of risk in basis points, coverage
ratio for doubtful outstandings
The cost of risk or commercial cost of risk is
defined on pages 45 and 574 of Societe Generale’s 2020 Universal
Registration Document. This indicator makes it possible to assess
the level of risk of each of the pillars as a percentage of balance
sheet loan commitments, including operating leases.
|
(In EUR m) |
Q2 20 |
Q2 19 |
H1 20 |
H1 19 |
French Retail Banking |
Net Cost
Of Risk |
442 |
129 |
691 |
223 |
Gross
loan Outstandings |
207,517 |
192,896 |
204,328 |
192,159 |
Cost
of Risk in bp |
85 |
27 |
68 |
23 |
International Retail Banking and Financial Services |
Net Cost Of Risk |
418 |
133 |
647 |
261 |
Gross
loan Outstandings |
133,475 |
139,634 |
134,941 |
134,747 |
Cost
of Risk in bp |
125 |
38 |
96 |
39 |
Global Banking and Investor Solutions |
Net Cost Of Risk |
419 |
33 |
761 |
75 |
Gross
loan Outstandings |
175,673 |
164,162 |
166,868 |
164,512 |
Cost
of Risk in bp |
95 |
8 |
91 |
9 |
Corporate Centre |
Net Cost Of Risk |
0 |
19 |
0 |
19 |
Gross loan Outstandings |
10,292 |
8,705 |
10,001 |
8,977 |
Cost
of Risk in bp |
3 |
86 |
3 |
42 |
Societe Generale Group |
Net Cost Of Risk |
1,279 |
314 |
2,099 |
578 |
Gross loan Outstandings |
526,958 |
505,397 |
516,138 |
500,395 |
Cost of Risk in bp |
97 |
25 |
81 |
23 |
The gross coverage ratio for doubtful
outstandings is calculated as the ratio of provisions
recognised in respect of the credit risk to gross outstandings
identified as in default within the meaning of the regulations,
without taking account of any guarantees provided. This coverage
ratio measures the maximum residual risk associated with
outstandings in default (“doubtful”).
7 - ROE, ROTE, RONE
The notions of ROE (Return on Equity) and ROTE
(Return on Tangible Equity), as well as their calculation
methodology, are specified on page 45 and 46 of Societe Generale’s
2020 Universal Registration Document. This measure makes it
possible to assess Societe Generale’s return on equity and return
on tangible equity. RONE (Return on Normative Equity) determines
the return on average normative equity allocated to the Group’s
businesses, according to the principles presented on page 46 of
Societe Generale’s 2020 Universal Registration Document. Group net
income used for the ratio numerator is book Group net income
adjusted for “interest net of tax payable on deeply subordinated
notes and undated subordinated notes, interest paid to holders of
deeply subordinated notes and undated subordinated notes, issue
premium amortisations” and “unrealised gains/losses booked under
shareholders’ equity, excluding conversion reserves” (see
methodology note No. 9). For ROTE, income is also restated for
goodwill impairment.
Details of the corrections made to book equity
in order to calculate ROE and ROTE for the period are given in the
table below:
ROTE calculation: calculation
methodology
End of period |
Q2 20 |
Q2 19 |
H1 20 |
H1 19 |
Shareholders' equity Group share |
60,659 |
62,492 |
60,659 |
62,492 |
Deeply subordinated notes |
(8,159) |
(9,861) |
(8,159) |
(9,861) |
Undated subordinated notes |
(283) |
(280) |
(283) |
(280) |
Interest net of tax payable to holders of deeply subordinated notes
& undated subordinated notes, interest paid to holders of
deeply subordinated notes & undated subordinated notes, issue
premium amortisations |
20 |
(39) |
20 |
(39) |
OCI excluding conversion reserves |
(834) |
(636) |
(834) |
(636) |
Dividend provision |
|
(717) |
|
(717) |
ROE equity end-of-period |
51,403 |
50,959 |
51,403 |
50,959 |
Average ROE equity |
52,388 |
50,250 |
52,830 |
49,842 |
Average Goodwill |
(4,270) |
(4,541) |
(4,416) |
(4,619) |
Average Intangible Assets |
(2,417) |
(2,194) |
(2,393) |
(2,194) |
Average ROTE equity |
45,701 |
43,515 |
46,021 |
43,029 |
Group net Income (a) |
(1,264) |
1,054 |
(1,590) |
1,740 |
Underlying Group net income (b) |
8 |
1,247 |
0 |
2,332 |
Interest on deeply subordinated notes and undated subordinated
notes (c) |
(161) |
(192) |
(320) |
(357) |
Cancellation of goodwill impairment (d) |
684 |
41 |
684 |
108 |
Ajusted Group net Income (e) = (a)+ (c)+(d) |
(741) |
903 |
(1,227) |
1,491 |
Ajusted Underlying Group net Income (f)=(b)+(c) |
(153) |
1,056 |
(321) |
1,975 |
|
|
|
|
|
Average ROTE equity (g) |
45,701 |
43,515 |
46,021 |
43,029 |
ROTE [quarter: (4*e/g), 6M: (2*e/g)] |
-6.5% |
8.3% |
-5.3% |
6.9% |
|
|
|
|
|
Average ROTE equity (underlying) (h) |
46,973 |
43,612 |
47,611 |
43,325 |
Underlying ROTE [quarter: (4*f/h), 6M: (2*f/h)] |
-1.3% |
9.7% |
-1.3% |
9.1% |
RONE calculation: Average capital allocated
to Core Businesses (in EURm)
In EURm |
T2-20 |
T2-19 |
Variation |
S1-20 |
S1-19 |
Variation |
French Retail Banking |
11,460 |
11,306 |
+1.4% |
11,321 |
11,281 |
+0.4% |
International Retail Banking & Financial Services |
10,820 |
11,051 |
-2.1% |
10,708 |
11,336 |
-5.5% |
Global Banking & Investor Solutions |
14,453 |
15,543 |
-7.0% |
14,024 |
16,064 |
-12.7% |
Core Businesses |
36,733 |
37,900 |
-3.1% |
36,053 |
38,681 |
-6.8% |
Corporate Centre |
15,655 |
12,350 |
+26.8% |
16,777 |
11,162 |
+50.3% |
Group |
52,388 |
50,250 |
+4.3% |
52,830 |
49,842 |
+6.0% |
8 - Net assets and tangible net
assets
Net assets and tangible net assets are defined
in the methodology, page 48 of the Group’s 2020 Universal
Registration Document. The items used to calculate them are
presented below:
End of period |
H1 20 |
Q1 20 |
2019 |
H1 19 |
Shareholders' equity Group share |
60,659 |
62,580 |
63,527 |
62,492 |
Deeply
subordinated notes |
(8,159) |
(8,258) |
(9,501) |
(9,861) |
Undated
subordinated notes |
(283) |
(288) |
(283) |
(280) |
Interest, net of tax, payable to holders of deeply subordinated
notes & undated subordinated notes, interest paid to holders of
deeply subordinated notes & undated subordinated notes, issue
premium amortisations |
20 |
1 |
4 |
(39) |
Bookvalue of own shares in trading portfolio |
335 |
381 |
375 |
431 |
Net Asset Value |
52,572 |
54,416 |
54,122 |
52,743 |
Goodwill |
(3,928) |
(4,611) |
(4,510) |
(4,548) |
Intangible Assets |
(2,458) |
(2,376) |
(2,362) |
(2,226) |
Net Tangible Asset Value |
46,186 |
47,429 |
47,250 |
45,969 |
|
|
|
|
|
Number of shares used to calculate NAPS** |
851,133 |
851,133 |
849,665 |
844,026 |
Net Asset Value per Share |
61.8 |
63.9 |
63.7 |
62.5 |
Net Tangible Asset Value per Share |
54.3 |
55.7 |
55.6 |
54.5 |
** The number of shares considered is the number
of ordinary shares outstanding as at June 30th, 2020, excluding
treasury shares and buybacks, but including the trading shares held
by the Group. In accordance with IAS 33, historical data per share
prior to the date of detachment of a preferential subscription
right are restated by the adjustment coefficient for the
transaction.
9 - Calculation of Earnings Per Share
(EPS)
The EPS published by Societe Generale is
calculated according to the rules defined by the IAS 33 standard
(see page 47 of Societe Generale’s 2020 Universal Registration
Document). The corrections made to Group net income in order to
calculate EPS correspond to the restatements carried out for the
calculation of ROE and ROTE. As specified on page 47 of Societe
Generale’s 2020 Universal Registration Document, the Group also
publishes EPS adjusted for the impact of non-economic and
exceptional items presented in methodology note No. 5 (underlying
EPS).The calculation of Earnings Per Share is described in the
following table:
Average number of shares (thousands) |
H1 20 |
Q1 20 |
2019 |
H1 19 |
Existing shares |
853,371 |
853,371 |
834,062 |
821,189 |
Deductions |
|
|
|
|
Shares
allocated to cover stock option plans and free shares awarded to
staff |
2,728 |
2,972 |
4,011 |
4,214 |
Other own shares and treasury shares |
|
|
149 |
249 |
Number of shares used to calculate EPS** |
850,643 |
850,399 |
829,902 |
816,726 |
Group net Income |
(1,590) |
(326) |
3,248 |
1,740 |
Interest
on deeply subordinated notes and undated subordinated notes |
(320) |
(159) |
(715) |
(357) |
Capital gain net of tax on partial buybacks |
|
|
|
|
Adjusted Group net income |
(1,910) |
(485) |
2,533 |
1,383 |
EPS (in EUR) |
-2.25 |
-0.57 |
3.05 |
1.69 |
Underlying EPS* (in EUR) |
-0.38 |
-0.07 |
4.03 |
|
* Excluding exceptional items and including
linearisation of the IFRIC 21 effect. ** The number of shares
considered is the number of ordinary shares outstanding as at June
30th, 2020, excluding treasury shares and buybacks, but including
the trading shares held by the Group.
10 - The Societe Generale Group’s Common
Equity Tier 1 capital is calculated in accordance with
applicable CRR/CRD4 rules. The fully-loaded solvency ratios are
presented pro forma for current earnings, net of dividends, for the
current financial year, unless specified otherwise. When there is
reference to phased-in ratios, these do not include the earnings
for the current financial year, unless specified otherwise. The
leverage ratio is calculated according to applicable CRR/CRD4 rules
including the provisions of the delegated act of October 2014.
Table of the change in the CET1 ratio in the
quarter
In bp |
|
CET1 as at 31/3/2020 |
12.6% |
Own funds evolution |
-7bp |
Organic RWAs change*of which |
-15bp |
RWAs of
businesses |
+2bp |
Non-guaranteed part of State-Guaranteed loans |
-4bp |
Rating
migration |
-8bp |
Corporates credit line drawdowns |
-5bp |
SME supporting factor |
+14bp |
Effect of waiting period on State-guaranteed loans (based on an
assumption of a final loan guarantee rate of approximately
90%) |
-27bp |
Quick
fix BCEOf which |
+12bp |
VaR/sVaR
multiplicator |
+7bp |
PVA transitional provision |
+5bp |
CET1 as at 30/06/2020 |
12.3% |
Phasing IFRS 9 |
+20bp |
CET1 as at 30/06/2020 including IFRS9 phasing |
12,5% |
NB (1) The sum of values contained in the tables
and analyses may differ slightly from the total reported due to
rounding rules.
(2) All the information on the results for the
period (notably: press release, downloadable data, presentation
slides and supplement) is available on Societe Generale’s website
www.societegenerale.com in the “Investor” section.
Societe
Generale
Societe Generale is one of the leading European
financial services groups. Based on a diversified and integrated
banking model, the Group combines financial strength and proven
expertise in innovation with a strategy of sustainable growth.
Committed to the positive transformations of the world’s societies
and economies, Societe Generale and its teams seek to build, day
after day, together with its clients, a better and sustainable
future through responsible and innovative financial solutions.
Active in the real economy for over 150 years,
with a solid position in Europe and connected to the rest of the
world, Societe Generale has over 138,000 members of staff in 62
countries and supports on a daily basis 29 million individual
clients, businesses and institutional investors around the world by
offering a wide range of advisory services and tailored financial
solutions. The Group is built on three complementary core
businesses:▪ French Retail Banking which
encompasses the Societe Generale, Crédit du Nord and Boursorama
brands. Each offers a full range of financial services with
omnichannel products at the cutting edge of digital innovation; ▪
International Retail Banking,
Insurance and Financial Services to Corporates, with networks
in Africa, Russia, Central and Eastern Europe and
specialised businesses that are leaders in their markets;
▪ Global Banking and Investor Solutions,
which offers recognised expertise, key international locations and
integrated solutions.
Societe Generale is included in the principal
socially responsible investment indices: DJSI (World and Europe),
FTSE4Good (Global and Europe), Euronext Vigeo (World, Europe and
Eurozone), four of the STOXX ESG Leaders indices, and the MSCI Low
Carbon Leaders Index.
For more information, you can follow us on
Twitter @societegenerale or visit our website
www.societegenerale.com
The footnote * in this document corresponds to
data adjusted for changes in Group structure and at constant
exchange rates([1]) including 20 basis points for IFRS9 phasing
([2]) pro-forma for the announced disposal of SG
Finans (+10 basis points)
([3]) quarterly average
(1) NPL ratio calculated according to the new
EBA methodology
(2) Ratio between the amount of provisions on
doubtful outstandings and the amount of these same outstandings
(1) Adjusted for exceptional items and the
linearisation of IFRIC 21
(1) Including 2.5% of senior preferred debt(2)
Total Liabilities and Own Funds
(3)4.4% including the “quick fix” in respect of
the exclusion of deposits with central banks announced by the ECB
at end-June, not yet applicable (estimation based on deposits with
the ECB only)
(1) Including BMTN (negotiable medium-term
notes)
(2) Including currency deposits
- Societe Generale_Press Release Q2-2020
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