SOCIETE GENERALE: 2016 FIRST QUARTER RESULTS
(Thomson Reuters ONE) -
Paris, May 4th, 2016
Q1 16: SOUND RESULTS BENEFITING FROM THE DIVERSIFICATION OF THE BUSINESS MODEL
* Net banking income of EUR 6.2 billion (vs. EUR 6.4 billion in Q1 15, -3.3%*
excluding non-economic items): the good performance of all Retail Banking
activities, the diversification of the business model and the development of
synergies have helped offset the decline in market revenues in a challenging
start to the year for the banking sector
* Operating expenses under control: -0.5%* (excluding refund of part of the
Euribor fine and adjusted for the effects of the IFRIC 21 accounting
standard)
* Lower net cost of risk (-10.1%*) reflecting the quality of assets.
Commercial cost of risk at 46 basis points((1) )(-9 basis points vs. Q1 15)
* Group net income of EUR 924 million in Q1 16 (EUR 868 million in Q1
15, +6.5%)
and EUR 829 million excluding non-economic items (EUR 833 million in Q1
15), marked by the substantial growth in all Retail Banking activities.
* CET1 ratio up +25 basis points vs. end-2015, at 11.1% at the end of Q1 16
(10.9% at end-2015)
Leverage ratio of 4.0% (stable vs. end-2015)
* Stable EPS**: EUR 0.90 in Q1 16 (EUR 0.91 in Q1 15)((2))
* When adjusted for changes in Group structure and at constant exchange rates.
** Excluding non-economic items (revaluation of own financial liabilities and
Debt Value Adjustment). Impact in net banking income of EUR +145m in Q1 16
and EUR +53m in Q1 15. Impact on Group net income of EUR +95m in Q1 16 and EUR
+35m in Q1 15. See methodology notes.
Items relating to financial data for 2015 have been restated in net banking
income and for the capital allocated to the businesses so as to take account of
the new capital allocation rule based on 11% of the businesses' RWA (risk-
weighted assets).
(1) Excluding litigation issues, in basis points for assets at the beginning of
the period, including operating leases. Annualised calculation
(2) Excluding non-economic items, gross EPS in Q1 15: EUR 0.96 and EUR 1.02 in
Q1 16. See methodology note No. 3
Societe Generale's Board of Directors met on May 3rd, 2016 under the
chairmanship of Lorenzo Bini Smaghi and examined the results for Q1 2016.
Book Group net income amounted to EUR 924 million in Q1 16, vs. EUR 868 million
in Q1 15 (+6.5%). If non-economic items are stripped out(()[1]()), Group net
income totalled EUR 829 million (vs. EUR 833 million in Q1 15), and benefited
from the diversification of the Group's universal banking model. The healthy
momentum of French Retail Banking (with a contribution up +17.6%) and
International Retail Banking & Financial Services, whose contribution to Group
net income doubled in relation to last year, helped offset the lower
contribution from market activities which enjoyed a very favourable environment
in Q1 2015, whereas conditions at the beginning of 2016 were challenging.
Net banking income totalled EUR 6,175 million in Q1 16 (-1.8%* vs. Q1 15). If
non-economic items are stripped out, it amounted to EUR 6,030 million (-3.3%*
vs. Q1 15).
The Group continued with its efforts to control operating expenses: when
adjusted for changes in Group structure and at constant exchange rates,
excluding the effect of the refund of the Euribor fine and adjusted for the
impact of IFRIC 21, they were down -0.5% vs. Q1 15. The decline reflects the
success of the cost savings plans implemented since 2012. Aware of the need to
maintain these efforts, the Group has implemented a new cost-cutting plan in
Global Banking & Investor Solutions aimed at saving an additional EUR 220
million by end-2017. This supplements the EUR 850 million plan already announced
for the same deadline.
The Group's commercial cost of risk[2] continued to decline to 46 basis points
(vs. 55 basis points in Q1 15), underpinned by the good quality of the Group's
assets. The net cost of risk amounted to EUR 524 million in Q1 16, down
-10.1%* vs. Q1 15 (at its lowest level since 2008).
The "Basel 3" Common Equity Tier 1 (fully-loaded CET1) ratio stood at 11.1%[3]
(10.9% at end-2015) due to the good capital generation during the quarter (+25
basis points). The leverage ratio stood at 4.0% and the total capital ratio
amounted to 16.4% (respectively 4.0% and 16.3% at end-2015).
Commenting on the Group's results for Q1 2016, Frédéric Oudéa - Chief Executive
Officer - stated:
"In a more challenging environment at the beginning of the year than last year,
the Group generated sound results in Q1 2016, illustrating the benefits of its
diversified and highly integrated business model, which is reflected in the
constantly increasing synergies between the businesses. Despite the low interest
rate environment, French Retail Banking continues to deliver a solid commercial
and financial performance, while pursuing the far-reaching transformation of the
operating and customer relationship model. International Retail Banking &
Financial Services has doubled its contribution to Group net income and provided
further evidence of its growth and profitability potential. In an unfavourable
market environment, Global Banking & Investor Solutions has posted resilient
results and reinforced measures to adjust its business model and increase
operating efficiency. With a sound balance sheet and robust solvency ratios, the
Group is confident about its outlook for 2016, and will continue to invest in
its growth drivers, while at the same time rigorously managing its costs and
risks."
1 - GROUP consolidated results
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En M EUR T1-16 T1-15 Variation
-------------------------------------------------------------------------
Net banking income 6,175 6,353 -2.8% -1,8%*
Net banking income ((1)) 6,030 6,300 -4.3% -3,3%*
Operating expenses (4,284) (4,442) -3.6% -2,3%*
Gross operating income 1,891 1,911 -1.0% -0,5%*
Gross operating income ((1)) 1,746 1,858 -6.0% -5,5%*
Net cost of risk (524) (613) -14.5% -10,1%*
Operating income 1,367 1,298 +5.3% +3,8%*
Operating income ((1)) 1,222 1,245 -1.8% -3,3%*
-------------------------------------------------------------------------
Net profits or losses from other assets 4 (34) n/s n/s
Impairment losses on goodwill 0 0 n/s n/s
-------------------------------------------------------------------------
Reported Group net income 924 868 +6.5% +6,5%*
Group net income ((1)) 829 833 -0.5% -0,5%*
-------------------------------------------------------------------------
Group ROE (after tax) +7.1% +6.9%
-------------------------------------------------------------------------
Adjusted ROE((2)) +9.8% +8.5%
-------------------------------------------------------------------------
1. Adjusted for revaluation of own financial liabilities and DVA
2. Corrected for the effect of the implementation of IFRIC 21 (excluding
3/4 of the taxes recognised in their entirety in Q1)
Net banking income
The Group's net banking income totalled EUR 6,175 million in Q1 16, vs. EUR
6,353 million in Q1 15, representing a decline of -1.8%* (and -3.3%* excluding
non-economic items). In a restrictive macroeconomic environment, the Group
benefited from the diversification of its universal banking model and its
ability to generate synergies.
* French Retail Banking (RBDF) revenues rose +1.0% in Q1 16 vs. Q1 15. If the
PEL/CEL provision is stripped out, revenues experienced an expected erosion
after an excellent year in 2015, dropping -3.0%. French Retail Banking
continued with its commercial expansion, generating more than 1,000 new
business customer relationships and another record in terms of new
relationships at Boursorama, with 61,000 new customers.
* International Retail Banking & Financial Services' (IBFS) net banking income
rose +5.4%* in Q1 16 vs. Q1 15. In International Retail Banking, revenues
were 6.7%* higher than in Q1 15, with increased revenues in all
regions. Insurance continued to expand (+7.8%* vs. Q1 15). Finally, in
Financial Services to Corporates, net banking income was up +6.9%* vs. Q1
15, driven by the growth in Operational Vehicle Leasing and Fleet Management
(+13.3%*).
* After a very good Q1 2015, Global Banking & Investor Solutions' (GBIS)
revenues were down -9.4%* in Q1 16, especially in Global Markets and
Investor Services (-12.8%*), which suffered from the effects of challenging
market conditions. Financing & Advisory revenues grew +8.2%* in Q1 16 vs. Q1
15, with an increase notably in Structured Financing.
The accounting impact of the revaluation of the Group's own financial
liabilities was EUR +145 million in Q1 16 (EUR +62 million in Q1 15). The DVA
impact was nil in Q1 16 - it was EUR -9 million in Q1 15 (see methodology
note No. 7). These two factors constitute the restated non-economic items in the
analyses of the Group's results.
Operating expenses
The Group's operating expenses amounted to EUR 4,284 million in Q1 16 (vs. EUR
4,442 million in Q1 15). They include the European Commission's refund of part
of the fine paid in respect of the Euribor affair in December 2013 (EUR 218
million). When corrected for this item, operating expenses were 1.4% higher than
in Q1 15. This variation can be explained by the increase in contributions to
resolution funds and the different taxes recognised in their entirety as from
the first quarter in accordance with the IFRIC 21 standard: they amounted to EUR
569 million in Q1 16 vs. EUR 386 million in 2015 (an increase of EUR +183
million). Excluding Euribor and adjusted for the effect of the implementation of
the IFRIC 21 accounting standard(1), operating expenses were down -0.5%* in
Q1 16 vs. Q1 15.
In an attempt to contain operating expenses, the Group has announced an
additional cost savings plan in Global Banking & Investor Solutions. This plan
will result in an additional EUR 220 million of savings by end-2017 (for non-
recurring transformation costs of EUR 160 million) and supplements the two
previous cost savings plans implemented since 2012. The first plan, completed in
2015, resulted in savings of EUR 900 million for non-recurring transformation
costs of EUR 420 million. The second plan, still under way, aims to save EUR
850 million over the period 2015-2017 for non-recurring transformation costs of
EUR 450 million over the period. All in all, the Group will therefore have
undertaken annual cost savings plans amounting to EUR 2 billion over the period
2012-2017, helping to offset the increase in taxes and generate the room for
manoeuvre to invest in its fast-growing activities. Given these efforts, 2016
operating expenses are expected to stabilise vs. 2015, with a change ranging
between 0% and -1%, or between 0% and +1% restating for the effects of the
partial refund of the Euribor fine.
Operating income
The Group's gross operating income amounted to EUR 1,891 million in Q1 16 (EUR
1,911 million for the same period in 2015).
The Group's net cost of risk amounted to EUR -524 million in Q1 16, down -10.1%*
vs. Q1 15, reflecting the good quality of the Group's assets.
The commercial cost of risk (expressed as a fraction of outstanding loans)
continued on its downtrend, therefore making it possible to confirm the Group's
full-year target. The commercial cost of risk stood at 46(2) basis points in Q1
16 vs. 55 basis points for the same period in 2015:
* In French Retail Banking, the commercial cost of risk continued to decline
and now stands at 35 basis points (vs. 47 basis points in Q1 15), thanks to
the low level for both business and individual customers.
* At 74 basis points (vs. 118 basis points in Q1 15), International Retail
Banking & Financial Services' cost of risk was also lower, due primarily to
an improvement in the cost of risk for business customers in Europe and
Africa. The cost of risk in Russia remained stable despite a challenging
economic environment.
* Global Banking & Investor Solutions' cost of risk amounted to 41 basis
points at the end of Q1 16 (vs. 12 basis points in Q1 15). This first
quarter was marked by the booking of additional provisions on the oil and
gas sector.
The gross doubtful outstandings ratio was 5.3% at end-March 2016 (vs. 5.5% at
end-March 2015). The Group's gross coverage ratio for doubtful outstandings
stood at 64%, up +1 point vs. March 2015. The improvement in these indicators
continues the trend observed for several years.
The Group's operating income amounted to EUR 1,367 million in Q1 16 (vs. EUR
1,298 million in Q1 15), up +3.8%*.
Net income
Group net income totalled EUR 924 million in Q1 16. This compares with Group net
income of EUR 868 million in Q1 15. The Group's effective tax rate
amounted to 28.0% in Q1 16 (29.3% in Q1 15).
When corrected for non-economic items (revaluation of own financial liabilities
and DVA)(1), Group net income amounted to EUR 829 million in Q1 16, stable vs.
Q1 15 (EUR 833 million).
The Group's ROE(2) was 7.1% in Q1 16 (6.9% in Q1 15).
Earnings per share amounts to EUR 1.02 for Q1 16 (vs. EUR 0.96 in Q1 15), after
deducting interest payable to holders of deeply subordinated notes and undated
subordinated notes(3). When adjusted for non-economic items, EPS for Q1 16
amounts to EUR 0.90 vs. EUR 0.91 in Q1 15 after deducting interest payable to
holders of deeply subordinated notes and undated subordinated notes((3)).
2 - the GROUP's financial structure
Group shareholders' equity totalled EUR 59.0 billion(1) at March 31st, 2016 (EUR
59.0 billion at December 31st, 2015). Net asset value per share was EUR 62.13,
including EUR 2.17 of unrealised capital gains. Tangible net asset value per
share was EUR 56.46.
The consolidated balance sheet totalled EUR 1,368 billion at March 31st, 2016
(EUR 1,334 billion at December 31st, 2015). The net amount of customer loan
outstandings, including lease financing, was EUR 385 billion (EUR 386 billion at
December 31st, 2015) - excluding securities sold under repurchase agreements. At
the same time, customer deposits amounted to EUR 360 billion, stable compared
with the figure at December 31st, 2015 (excluding securities sold under
repurchase agreements).
In Q1 2016, the Group issued EUR 9.7 billion of medium/long-term debt with EUR
9.1 billion at parent company level (in respect of a financing programme of EUR
34 billion in 2016), having an average maturity of 5.8 years and an average
spread of 46 basis points (vs. the 6-month mid-swap, excluding subordinated
debt), and EUR 0.6 billion by the subsidiaries. The LCR (Liquidity Coverage
Ratio) increased and was well above regulatory requirements at 150% at end-March
2016 vs. 124% at end-2015.
The Group's risk-weighted assets amounted to EUR 351.2 billion at March
31st, 2016 (vs.
EUR 356.7 billion at end-December 2015) according to CRR/CRD4 rules. Risk-
weighted assets in respect of credit risk represent 82% of the total, at EUR
289.0 billion, down -1.5% vs. December 31st, 2015.
At March 31st, 2016, the Group's Common Equity Tier 1 ratio(2) stood at
11.1%(3) (10.9% at end-December 2015), up +25 basis points vs. end-2015. The
Tier 1 ratio was 13.7% (13.5% at end-December 2015) and the total capital ratio
amounted to 16.4% (16.3% at end-December 2015).
The leverage ratio stood at 4.0%((2) )at March 31st, 2016 (4.0% at end-December
2015).
The Group has confirmed its requirements in terms of solidity of the balance
sheet, with the retention of a margin of 100 to 150 basis points above the
regulatory thresholds. For the CET 1 ratio, a Common Equity Tier 1 ratio((2))
target for the Group at end-2016 has been set above 11%, with a total capital
ratio target of more than 18% at end-2017 in light of the implementation of TLAC
(Total Loss Absorbing Capacity) obligations.
The allocation of capital to the Group's different businesses is based, as from
January 1st, 2016, on 11% of each business' risk-weighted assets.
The Group is rated by the rating agencies DBRS (long-term rating: "A (high)"
with a stable outlook; short-term rating: "R-1 (middle)"), FitchRatings (long-
term rating: "A" with a stable outlook; short-term rating: "F1"), Moody's
(deposit and senior unsecured long-term ratings: "A2" with a stable outlook;
short-term rating: "P-1" and long-term Counterparty Risk Assessment of "A1" and
short-term Counterparty Risk Assessment of "P-1"), Standard & Poor's (long-term
rating: "A" with a stable outlook; short-term rating: "A-1") and R&I (long-term
rating: "A" with a stable outlook).
3 - FrENCH RETAIL BANKING
------------
In EUR m Q1 16 Q1 15 Change
--------------------------------------------------------------------
Net banking income 2,084 2,064 +1.0%
Net banking income ex. PEL/CEL 2,107 2,173 -3.0%
--------------------------------------------------------------------
Operating expenses (1,425) (1,391) +2.4%
Gross operating income 659 673 -2.1%
--------------------------------------------------------------------
Gross operating income ex. PEL/CEL 682 782 -12.8%
--------------------------------------------------------------------
Net cost of risk (180) (230) -21.7%
--------------------------------------------------------------------
Operating income 479 443 +8.1%
Group net income 328 279 +17.6%
RONE 12.6% 10.5%
Adjusted RONE((1)) +14.8% +14.1%
RONE: See methodology note No. 2
1. Corrected for the effect of IFRIC 21 and PEL/CEL
After a record year in 2015, French Retail Banking continued to enjoy a robust
commercial momentum in Q1 16.
The three brands continued to expand their customer base: with nearly 61,000 new
customers, Boursorama, the leading 100% mobile bank in France, experienced an
unequalled level of customer acquisition over the period and strengthened its
leadership position. In the individual customer segment, despite a lower level
of housing loan production than in 2015, the number of new customers was robust
(+126,000 excluding Boursorama). In the business segment, French Retail Banking
established relationships with more than 1,000 new companies in Q1 16.
In line with previous quarters, average outstanding deposits in the balance
sheet continued to post strong growth of 6.5% to EUR 176.4 billion, driven by
new customers won and the growth in sight deposits (+18.1% in Q1 16). At the
same time, the level of gross insurance production remained high (EUR +3.0
billion). The other growth drivers were also healthy, with the continued
development of synergies: net inflow for the new Private Banking operation in
France came to EUR 715 million in Q1 16. There was a significant increase in the
Property/Casualty and Personal Protection insurance ownership rate for French
Retail Banking customers (increase of 1 point in the penetration rate to 19.6%
and +2.7 points to 8.3% between 2013 and 2015 respectively).
Thanks to the proactive stance of the French Retail Banking teams in serving
their customers, the Group continued to make an active contribution to
supporting the economy: average outstanding loans totalled EUR 182.4 billion, up
+4.0% vs. Q1 15. Investment loan production rose 14.8% in Q1 16, providing
further confirmation of the recovery which began in 2015 and contributed to the
growth of outstanding medium/long-term business loans (+1.5% vs. Q1 15). After a
record level in 2015, housing loan production normalised (-32.3% vs. Q1 15).
However, outstanding housing loans rose substantially (+7.9% vs. Q1 15). The
average loan/deposit ratio continued to decline to 103% in Q1 16 (vs. 105% in Q4
15).
French Retail Banking posted slightly higher revenues (+1.0%). After
neutralising the impact of PEL/CEL provisions and non-recurring items booked in
Q1 15, revenues were 2.2% lower than in Q1 15 (-3.0% excluding PEL/CEL effect),
in line with anticipations of an erosion of net banking income in 2016. The
interest margin was restrained by the negative effects of the low interest rate
environment and housing loan renegotiations, which were slightly mitigated by
loan production and strong deposit inflow. Thanks to the development of
synergies with the Group's other businesses, commissions were up 1.1% vs. Q1
15, driven by financial commissions.
Increased investments in the digital transformation and the higher contribution
to the European Single Resolution Fund resulted in operating expenses rising
+2.4% in Q1 16 (vs. Q1 15), whereas French Retail Banking maintained rigorous
control of other expenses.
Operating income came to EUR 479 million (up +8.1%), on the back of the sharp
decline in the net cost of risk (-21.7% year-on-year).
French Retail Banking's contribution to Group net income totalled EUR 328
million in Q1 16, up +17.6% vs. Q1 15. The contribution to Group net income was
slightly lower (-1.1%), excluding the PEL/CEL effect. However, the level of
profitability remained robust (RONE of 14.8% excluding PEL/CEL effect and
proforma for IFRIC 21).
4 - INTERNATIONAL RETAIL BANKING & FINANCIAL SERVICES
The division's contribution to Group net income totalled EUR 300 million in Q1
16, a twofold increase vs. Q1 15 (EUR 148 million). The increase can be
attributed to revenue growth of +5.4%* vs. Q1 15 to EUR 1,825 million. Operating
expenses remained under control, with the increase of +2.1%* mainly related to
the higher contributions to resolution funds. The net cost of risk was also
significantly lower (-30.7%*).
----------
In EUR m Q1 16 Q1 15 Change
-----------------------------------------------------------------------
Net banking income 1,825 1,795 +1.7% +5,4%*
Operating expenses (1,133) (1,157) -2.1% +2,1%*
-----------------------------------------------------------------------
Gross operating income 692 638 +8.5% +11,4%*
-----------------------------------------------------------------------
Net cost of risk (212) (333) -36.3% -30,7%*
-----------------------------------------------------------------------
Operating income 480 305 +57.4% +51,9%*
-----------------------------------------------------------------------
Net profits or losses from other 0 (25) +100.0% +100,0%*
assets
Impairment losses on goodwill 0 0 n/s n/s
-----------------------------------------------------------------------
Group net income 300 148 x 2,0 +83,0%*
RONE +11.4% +5.7%
Adjusted RONE((1))
+13.6% +7.0%
RONE: See methodology note No. 2
1. Corrected for the effect of IFRIC 21
4.1 International Retail Banking
International Retail Banking's outstanding loans rose +4.7%* in Q1 16 vs. Q1
15, to EUR 77.9 billion. The increase was particularly strong in the Czech
Republic, Western Europe and Africa. Deposits also continued to enjoy robust
growth in virtually all the Group's operations. Outstanding deposits totalled
EUR 71.1 billion, up +4.4%*, with very dynamic inflow in Central and Eastern
European countries and in Sub-Saharan Africa.
International Retail Banking posted revenues of EUR 1,218 million (+6.7%*) in Q1
16 on the back of the good business performance in Europe and Sub-Saharan
Africa, as well as the improvement in margins and loan production in Russia.
Gross operating income came to EUR 414 million (+9.8%*) and the contribution to
Group net income was EUR 122 million, vs. EUR 34 million in Q1 15 (x3.6).
In Western Europe, where the Group has operations in France, Germany and Italy,
mainly in consumer finance, outstanding loans were up +7.3%* at EUR 14.6
billion. Car financing was particularly dynamic over the period. In Q1 16, the
region posted revenues of EUR 167 million, gross operating income of EUR 74
million and a contribution to Group net income of EUR 31 million, up +34.8% vs.
Q1 15.
In the Czech Republic, Komercni Banka (KB) delivered a solid commercial
performance in Q1 16. Outstanding loans rose +7.3%* vs. Q1 15 to EUR 20.0
billion, driven by the dynamism of loans to individuals and large corporates.
Over the same period, outstanding deposits climbed +4.2%* to EUR 25.5
billion. Revenues were stable* in Q1 16 vs. Q1 15 at EUR 257 million, given the
persistent low interest rate environment. Over the same period, operating
expenses were up +12.5%* due to the implementation of the local resolution fund.
The net cost of risk is normalising after reaching a low of EUR 4 million in Q1
15. It amounted to EUR 18 million in Q1 16. Accordingly, the contribution to
Group net income fell -25.9% to EUR 40 million.
In Romania, the economic environment is gradually improving. BRD Group's
outstanding loans rose +1.4%* to EUR 6.1 billion, primarily in the individual
customer and large corporate segments. Outstanding deposits were up +7.5%* at
EUR 8.6 billion. In this context, the BRD Group's revenues were 0.8%* higher
than in Q1 15 at EUR 128 million. Rigorous cost control resulted in operating
expenses declining -2.0%* over the period to EUR 98 million. BRD's contribution
to Group net income was EUR 2 million in Q1 16, compared to EUR 1 million in Q1
15.
In other European countries, the Group maintained a strong deposit inflow in Q1
16 (outstandings up +5.9%* at EUR 10.9 billion), while outstanding loans were
3.9%* higher at EUR 11.4 billion. Revenues were up +5.9%* in Q1 16 vs. Q1 15 (at
EUR 179 million) and operating expenses amounted to EUR 134 million. The
contribution to Group net income came to EUR 24 million, up +41.2% vs. Q1 15.
In Russia, in a still challenging environment, outstanding loans were down
-5.3%* vs. Q1 15 at EUR 7.9 billion due to a more selective
approach in loan production for individual customers. Corporate activity
remained buoyant. Outstanding deposits were 5.4%* lower than in Q1 15 at
EUR 6.6 billion. Net banking income climbed +48.4%* in Q1 16 to EUR 138
million, in conjunction with the improvement in margins and loan production
volumes. Costs remained under control at EUR 116 million, down -0.9%* in a high
inflation environment. Overall, SG Russia(1) reduced its losses over the period
to EUR -18 million in Q1 16 (EUR -89 million in Q1 15).
In Africa and other regions where International Retail Banking operates,
outstanding loans rose +6.5%* vs. Q1 15 to EUR 17.7 billion. Business was
particularly dynamic in Algeria, Tunisia and West Africa. Over the same period,
outstanding deposits also amounted to EUR 17.7 billion, up +6.2%*. At EUR 349
million, revenues rose +4.5%* vs. Q1 15, operating expenses were up +7.7%* and
the net cost of risk was down -30.5%*. Overall, the contribution to Group net
income came to EUR 52 million, up +15.6% vs. Q1 15.
4.2 Insurance
The Insurance business maintained its commercial momentum in Q1 16. Life
insurance outstandings rose +2.6%* vs. Q1 15 to EUR 95.2 billion. Net inflow
amounted to EUR 0.8 billion in Q1 16, with the proportion of unit-linked
products remaining at a high level (60%). In terms of protection (Personal
Protection and Property/Casualty insurance), business was also buoyant with
premiums climbing +8% vs. Q1 15 to EUR 341 million in Q1 16.
The Insurance business delivered another sound financial performance in Q1 16.
Net banking income was 7.8%* higher than in Q1 15 at EUR 220 million. The
contribution to Group net income was up +11.4% in Q1 16, at EUR 78 million.
4.3 Financial Services to Corporates
Financial Services to Corporates maintained a strong momentum, with revenues of
EUR 385 million in Q1 16, substantially higher than in Q1 15 (+6.9%*). Operating
expenses totalled EUR 202 million, up +6.3%*. Earnings were 16.4% higher than in
Q1 15, with a contribution to Group net income of EUR 128 million.
Operational Vehicle Leasing and Fleet Management continued to enjoy strong
growth in its vehicle fleet in Q1 16 (+9.1% vs. Q1 15). This performance was
underpinned by the successful development of its partnerships with car
manufacturers and retail banking networks. ALD Automotive has also strengthened
its position in the SME and VSE customer segment and accelerated its growth in
the French and European markets with the acquisition of the Parcours Group.
Equipment Finance enjoyed a healthy level of new business in Q1 16 (up +2.7%*
vs. Q1 15). Growth was focused mainly on the transport and industrial equipment
sectors. New business margins held up well. Outstanding loans totalled EUR 15.4
billion (excluding factoring), up +4.4%* vs. Q1 15.
5 - GLOBAL BANKING & INVESTOR SOLUTIONS
----------
In EUR m Q1 16 Q1 15 Change
----------------------------------------------------------------------
Net banking income 2,357 2,604 -9.5% -9,4%*
Operating expenses (1,717) (1,874) -8.4% -8,0%*
----------------------------------------------------------------------
Gross operating income 640 730 -12.3% -13,1%*
----------------------------------------------------------------------
Net cost of risk (140) (50) X2,8 -x3,0*
----------------------------------------------------------------------
Operating income 500 680 -26.5% -27,6%*
----------------------------------------------------------------------
Net profits or losses from other (12) (1) n/s n/s
assets
Impairment losses on goodwill 0 0 n/s n/s
----------------------------------------------------------------------
Group net income 454 532 -14.70% -12,3%*
RONE +11.5% +14.3%
Adjusted RONE((1))
+15.6% +16.9%
RONE: See methodology note No. 2
1. Corrected for the effect of IFRIC 21
Global Banking & Investor Solutions experienced a mixed start to the year, with
revenues of EUR 2,357 million in Q1 16, down -9.5% vs. Q1 15 which
benefited from a particularly favourable environment (EUR 2,604 million). The
result reflects a decline in the revenues of Global Markets and Asset and Wealth
Management, in a challenging market environment, and the growth of Financing &
Advisory activities.
Global Markets & Investor Services
Global Markets & Investor Services' revenues totalled EUR 1,549 million in Q1
16, down -12.9% vs. Q1 15. The beginning of the quarter was marked by increasing
concerns regarding the Chinese economy and the ongoing decline in oil prices,
which led to turbulence in the equity markets with the instability of volatility
and correlations. The rise in oil prices and the European Central Bank's
announcements triggered a slight rebound in the second part of the quarter.
* Equity activities experienced a decline in performance, with revenues down
-36.8% in Q1 16 vs. Q1 15, at EUR 540 million, both in flow activities and
structured products, in market conditions marked by investors' risk
aversion. However, listed products grew substantially on the back of market
share gains in Europe. The Group has maintained a recognised position in
securities transactions (market share of 9.5% in Q1 16, an increase vs. Q1
15 based on SG Euronext Global volumes).
* At EUR 689 million, Fixed Income, Currencies & Commodities posted revenues
up +17.0% vs. Q1 15. The good performance of rate and commodity activities
in Q1 16 helped offset weak market appetite for credit and forex activities,
which were impacted by an unfavourable market environment, with substantial
instability and lower volumes.
* Prime Services' revenues totalled EUR 161 million in Q1 16, up +11.0% vs. Q1
15. This result reflects a healthy commercial momentum, notably in Prime
Brokerage activities, with the winning of new mandates resulting from the
revenue synergies achieved with the integration of Newedge.
* Securities Services saw its assets under custody reach EUR 4,019 billion,
slightly higher than in December 2015. Over the same period, assets under
administration fell -6.0% to EUR 574 billion. Securities Services' revenues
were down -15.9% in Q1 16 vs. Q1 15 at EUR 159 million, due to an uncertain
and declining market, leading to a reduction in trading volumes and the
asset base, as well as a negative interest rate environment.
Financing & Advisory
Financing & Advisory posted revenues of EUR 572 million, up +8.5% vs. Q1 15,
driven by the good momentum on structured financing. Natural resources financing
proved resilient, in an increasingly competitive environment. The market share
of Debt Capital Markets activities (raising of debt on behalf of clients)
increased in Q1 16: 6.6% and No. 3 in the euro issues segment all issuers
combined (5.4% in 2015 and No. 5, source IFR). Societe Generale's expertise was
recognised again in Q1 16, with the title of "Best Investment Bank in France",
awarded by Global Finance.
Asset and Wealth Management
The revenues of the Asset and Wealth Management business line totalled EUR 236
million in Q1 16, down -21.1% vs. Q1 15.
Private Banking's assets under management amounted to EUR 110 billion at end-
March 2016. Despite buoyant inflow of EUR +1.7 billion, notably in France and
Luxembourg, assets under management were 2% lower than at end-2015, reflecting,
amongst other things, negative market effects. Net banking income was down
-18.7% vs. Q1 15, at EUR 196 million, due to declining markets, with this
variation being enhanced by the recognition in Q1 15 of non-recurring income.
The gross margin remained at 106 basis points.
Lyxor's assets under management came to EUR 100.7 billion (-3% vs. end-December
2015), despite positive inflow, impacted by the market trend. Lyxor has
maintained its No. 3 ETF ranking in Europe, with a market share of 10.3% (source
ETFGI). Lyxor's revenues amounted to EUR 32 million in Q1 16, down -38.5% vs. Q1
15, in an unfavourable market environment and in conjunction with a shift in the
business mix towards lower margin activities.
Operating expenses
Global Banking & Investor Solutions' operating expenses were down -8.4% in Q1
16 vs. Q1 15, reflecting the refund of part of the Euribor fine(1), which more
than offsets the higher contribution to the Single Resolution Fund(2) (included
in full in Q1 in accordance with the IFRIC 21 standard). When restated for these
two effects, operating expenses were down -1.9%. In order to deal with a
deteriorated environment and an increase in regulatory costs, the division has
put in place an additional cost savings plan aimed at reducing its operating
expenses by an additional EUR 220 million between now and end-2017.
Operating income
Gross operating income came to EUR 640 million, down -12.3% vs. Q1 15.
The net cost of risk totalled EUR 140 million in Q1 16, including new provisions
on the oil and gas sector. It was EUR 90 million higher than in Q1 15 but EUR
90 million lower than in Q4 15.
The division's operating income totalled EUR 500 million in Q1 16, down -26.5%
vs. Q1 15.
Net income
The division's contribution to Group net income came to EUR 454 million in Q1
16 (-14.7% vs. Q1 15). When restated for the effect of the IFRIC 21 standard,
the division's RONE amounted to 15.6% (11.5% in absolute terms). Excluding the
effect of the partial refund of the Euribor fine, Global Banking & Investor
Solutions' RONE was 10.1% in Q1 16.
6 - CORPORATE CENTRE
---------
In EUR m Q1 16 Q1 15
----------------------------------------------------------
Net banking income (91) (110)
Net banking income ((1)) (236) (172)
Operating expenses (9) (20)
----------------------------------------------------------
Gross operating income (100) (130)
Gross operating income ((1)) (245) (192)
----------------------------------------------------------
Net cost of risk 8 0
Net profits or losses from other assets 18 9
----------------------------------------------------------
Group net income (158) (91)
Group net income ((1)) (253) (132)
1. Adjusted for revaluation of own financial liabilities
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 revenues totalled EUR -91 million in Q1 16 (EUR -110
million in Q1 15), including EUR +145 million in respect of the revaluation of
the Group's own financial liabilities (EUR +62 million in Q1 15).
Operating expenses amounted to EUR -9 million (EUR -20 million in Q1 15). The
Corporate Centre's gross operating income was EUR -100 million in Q1 16 vs. EUR
-130 million in Q1 15. When restated for the revaluation of own financial
liabilities (see methodology note No. 7), gross operating income amounted to EUR
-245 million in Q1 16 (vs. EUR -192 million in Q1 15).
The new rules for the allocation of capital to the businesses, established on
the basis of 11% of RWA (risk-weighted assets) since January 1st, 2016, have led
to the estimate for the Corporate Centre's gross operating income, excluding the
revaluation of own financial liabilities, being revised to around EUR -650
million for 2016.
The Corporate Centre's contribution to Group net income was EUR -158 million in
Q1 16, vs. EUR -91 million in Q1 15.
7. conclusion
In Q1 2016, Societe Generale generated Group net income of EUR 924 million in a
sluggish economic environment. This sound result is underpinned by the strength
of its three pillars: (i) French Retail Banking, which once again demonstrated
the profitability of its business model and its ability to expand in its growth
drivers, (ii) International Retail Banking & Financial Services which has
consolidated its growth in high-potential businesses and regions, (iii) Global
Banking & Investor Solutions which is supported by its synergetic business model
and pursuing its efforts to control costs and risks. EPS adjusted for non-
economic items amounts to EUR 0.90 in Q1 16, stable vs. Q1 15 in a much less
favourable environment.
Societe Generale intends to draw on the strength of its diversified banking
model, the additional efforts made on operating expenses, and the good quality
of its asset portfolio to sustain its commercial and financial performance in
2016.
8 - 2016-2017 FINANCIAL CALENDAR
2016-2017 financial communication calendar
May 18th, 2016 Combined General Meeting
May 25th, 2016 Detachment of the dividend
May 27th, 2016 Payment of the dividend
August 3rd, 2016 Second quarter and first half 2016 results
November 3rd, 2016 Third quarter and nine months 2016 results
February 9th, 2017 Fourth quarter and FY 2016 results
May 4th, 2017 First quarter 2017 results
August 2nd, 2017 Second quarter and first half 2017 results
November 3rd, 2017 Third quarter and nine months 2017 results
+------------------------------------------------------------------------------+
| |
|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 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
--------
CONSOLIDATED INCOME STATEMENT Q1 16 Q1 15 Change
(in EUR millions) Q1 vs. Q1
-------------------------------------------------------------------------------
Net banking income 6,175 6,353 -2.80% -1,8%*
Operating expenses -4,284 -4,442 -3.60% -2,3%*
-------------------------------------------------------------------------------
Gross operating income 1,891 1,911 -1.00% -0,5%*
Net cost of risk -524 -613 -14.50% -10,1%*
Operating income 1,367 1,298 5.30% +3,8%*
-------------------------------------------------------------------------------
Net income from companies accounted for by the 4 -34 n/s n/s
equity method
Net profits or losses from other assets 35 68 -48.50% -25,5%*
Impairment losses on goodwill n/s n/s
Income tax -384 -370 3.80% +2,7%*
Net income 1,022 962 6.20% +6,1%*
-------------------------------------------------------------------------------
O.w. non controlling interests 98 94 4.30% +3,2%*
-------------------------------------------------------------------------------
Group net income 924 868 6.50% +6,5%*
-------------------------------------------------------------------------------
Tier 1 ratio at end of period 13.7% 12.4%
--------------------------------------------------
* When adjusted for changes in Group structure and at constant exchange rate
NET INCOME AFTER TAX BY CORE BUSINESS
(In EUR millions)
-------
Q1 16 Q1 15 Change
Q1 vs. Q1
------------------------------------------------------------------------
French Retail Banking 328 279 17.60%
International Retail Banking & Financial Services 300 148 x 2,0
Global Banking and Investor Solutions 454 532 -14.70%
CORE BUSINESSES 1,082 959 12.80%
------------------------------------------------------------------------
Corporate Centre -158 -91 -73.60%
------------------------------------------------------------------------
GROUP 924 868 6.50%
------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
----------
Assets (in billions of euros) 31.03.16 31.12.15
-------------------------------------------------------------------------------
Cash, due from central banks 78.1 78.6
Financial assets measured at fair value through profit and 534.2 519.3
loss
Hedging derivatives 20.8 16.5
Available-for-sale financial assets 139.4 134.2
Due from banks 71.7 71.7
Customer loans((1)) 411.6 405.3
Revaluation differences on portfolios hedged against 3.2 2.7
interest rate risk
Held-to-maturity financial assets 4 4
Tax assets 7.1 7.4
Other assets 72.6 69.4
Non-current assets held for sale 0.1 0.2
Investments in subsidiaries and affiliates accounted for by 1.2 1.4
equity method
Tangible and intangible fixed assets 19.6 19.4
Goodwill 4.4 4.4
-------------------------------------------------------------------------------
Total 1,367.9 1,334.4
-------------------------------------------------------------------------------
----------
Liabilities (in billions of euros) 31.03.16 31.12.15
-------------------------------------------------------------------------------
Due to central banks 9.2 7
Financial liabilities measured at fair value through profit 480.9 455
and loss
Hedging derivatives 12.5 9.5
Due to banks 94.2 95.5
Customer deposits 372.5 379.6
Securitised debt payables 106.5 106.4
Revaluation differences on portfolios hedged against 10.3 8.1
interest rate risk
Tax liabilities 1.6 1.6
Other liabilities 89.4 83.1
Non-current liabilities held for sale 0.2 0.5
Underwriting reserves of insurance companies 109.6 107.3
Provisions 5.2 5.2
Subordinated debt 13 13
Shareholders' equity 59 59
Non controlling Interests 3.7 3.6
-------------------------------------------------------------------------------
Total 1,367.9 1,334.4
-------------------------------------------------------------------------------
(1) Customer loans include lease financing.
10 - APPENDIX 2: METHODOLOGY
1- The Group's consolidated results as at March 31st, 2016 were examined by
the Board of Directors on May 3rd, 2016.
The financial information presented in respect of Q1 2016 year has been prepared
in accordance with IFRS as adopted in the European Union and applicable at that
date, and has not been audited.
Note that the data for the 2015 financial year have been restated due to
modifications to the rules for calculating normative capital allocation (based
on 11% of RWA - risk-weighted assets - since January 1st, 2016 vs. 10%
previously.
The IFRIC 21 adjustment corrects the charges recognised 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.
2- Group ROE is calculated on the basis of average Group shareholders' equity
under IFRS excluding
(i) unrealised or deferred capital gains or losses booked directly under
shareholders' equity excluding conversion reserves, (ii) deeply subordinated
notes, (iii) undated subordinated notes recognised as shareholders' equity
("restated"), and deducting (iv) interest payable to holders of deeply
subordinated notes and of the restated, undated subordinated notes, (v) a
provision in respect of dividends to be paid to shareholders (EUR 1,952 million,
including EUR 359 million in respect of Q1 2016). The net income used to
calculate ROE is based on Group net income excluding interest, net of tax
impact, to be paid to holders of deeply subordinated notes for the period and,
since 2006, holders of deeply subordinated notes and restated, undated
subordinated notes (see below).
As from January 1st, 2016, the allocation of capital to the different businesses
is based on 11% of risk-weighted assets at the beginning of the period. This
normative capital allocation is used to calculate RONE (Return on Normative
Equity) which measures the profitability of the businesses.
3- For the calculation of earnings per share, "Group net income for the period"
is corrected (reduced in the case of a profit and increased in the case of a
loss) for capital gains/losses recorded on partial buybacks (neutral in 2016)
and interest, net of tax impact, to be paid to holders of:
(i) deeply subordinated notes (EUR -114 million in respect of Q1 16),
(ii) undated subordinated notes recognised as shareholders' equity (EUR 2
million in respect of Q1 16).
Earnings per share is therefore calculated as the ratio of corrected Group net
income for the period to the average number of ordinary shares outstanding,
excluding own shares and treasury shares but including (a) trading shares held
by the Group and (b) shares held under the liquidity contract.
4- Net assets are comprised of Group shareholders' equity, excluding (i) deeply
subordinated notes
(EUR 8.8 billion), undated subordinated notes previously recognised as debt (EUR
0.4 billion) and (ii) interest payable to holders of deeply subordinated notes
and undated subordinated notes, but reinstating the book value of trading shares
held by the Group and shares held under the liquidity contract. Tangible net
assets are corrected for net goodwill in the assets and goodwill under the
equity method. In order to calculate Net Asset Value Per Share or Tangible Net
Asset Value Per Share, the number of shares used to calculate book value per
share is the number of shares issued at March 31st, 2016, excluding own shares
and treasury shares but including (a) trading shares held by the Group and (b)
shares held under the liquidity contract.
5- 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.
6- The Group's ROTE is calculated on the basis of tangible capital, i.e.
excluding cumulative average book capital (Group share), average net goodwill in
the assets and underlying average goodwill relating to shareholdings in
companies accounted for by the equity method. The net income used to calculate
ROTE is based on Group net income excluding goodwill write-down, reinstating
interest net of tax on deeply subordinated notes for the period (including
issuance fees paid, for the period, to external parties and the discount charge
related to the issue premium for deeply subordinated notes) and interest net of
tax on undated subordinated notes (including issuance fees paid, for the period,
to external parties and the discount charge related to the issue premium for
undated subordinated notes).
7 - Non-economic items and restatements
Non-economic items correspond to the revaluation of own financial liabilities
and DVA on derivative instruments. Details of these items, and other items that
are restated, are given below.
----------------------------------------------------
Net Group
banking Operating Cost of net
In EUR m Q1 16 income expenses Others risk income
--------------------------------------------------------------------
Revaluation of Corporate
own financial Centre
liabilities* 145 0 95
--------------------------------------------------------------------
Accounting Group
impact of DVA* 0 0
--------------------------------------------------------------------
Accounting Group
impact of CVA** -54 -39
--------------------------------------------------------------------
Global
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Unternehmensinformation / Kurzprofil:
Datum: 04.05.2016 - 06:46 Uhr
Sprache: Deutsch
News-ID 468487
Anzahl Zeichen: 65636
contact information:
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