(BFM Bourse) – Two French banks have published their fourth quarter results. The mutual bank is suffering from lower-than-expected revenue and higher costs while Societe Generale is confident about its profits.
Certain fears awaited the results of Crédit Agricole SA and Société Générale, as BNP Paribas was strongly sanctioned by the market last week, weighing in on a weaker-than-expected fourth quarter.
For the moment, the accounts of the two French banks are not pleasing the market. Despite record profits of 6.35 billion euros in 2023 as a whole, Crédit Agricole Group’s listed arm, a copy of Crédit Agricole SA (CASA), rose nearly 20%, leaving investors frozen.
The share thus fell 6% around 12 p.m., the biggest drop in the CAC 40, which therefore recalls the treatment that the market reserved for the results of BNP Paribas.
In the fourth quarter, CASA’s net profit was 1.334 billion euros, above the consensus figure of 1.284 billion euros.
The reasons for investor dissatisfaction lie in other areas. “Revenues are slightly lower than expected while expenses are higher than expected, leading to operating results that are less good than expected,” sums up the financial intermediary.
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Insurance weight reduced by climate damage
Underlying net banking income on a turnover-equivalent basis was 6.03 billion euros, 2% below consensus, notes Morgan Stanley. At the same time, the American bank continues, underlying operating expenses came out 4% higher than expected, with 3.71 billion euros against the consensus of 3.56 billion euros. These charges notably include non-recurring effects of around 187 million euros.
This resulted in an underlying gross operating profit of 2.307 billion euros, 12% below the consensus of 2.61 billion euros.
In detail, UBS notes that with the exception of corporate and investment banking, all CASA divisions disappointed in their gross operating results. Community banking and insurance were “particularly weak” in Italy, the Swiss establishment added.
Royal Bank of Canada, for its part, highlighted the stark failure of Credit Agricole Assurance, with gross operating profit 21.5% below expectations. The division was penalized by two exceptional elements, such as “high climate-related loss experience”, which weighed down its income by 262 million euros, and the negative impact of 205 million euros linked to the IFRS 17 accounting standard.
France’s local bank, with the LCL brand, generated an underlying gross operating profit of 338 million euros, 11.6% below consensus, Royal Bank of Canada also notes.
In terms of solvency, in line with expectations, the non-phased CET 1 ratio (ie equity to risk-weighted outstanding assets) was 11.7%.
Positive point: Crédit Agricole SA announced it will propose a dividend of 1.05 euros per share, up 24% from a year earlier and beating analysts’ estimates of 87 cents, according to Morgan Stanley.
Better than expected profit at Société Générale
Societe Generale is doing better. La Défense Bank rose 0.1% around 12 a.m., even after clearly moving into the green.
The group, led by Slovomir Krupa, has suffered from a significant discount in the stock market compared to its European rivals and its French counterparts. Ahead of the release of its results, “After the release of BNP, there were concerns about its profits, but they are ultimately better than expected”, explained the financial intermediary quoted earlier.
Societe Generale’s total operating income was 1.29 billion euros in the fourth quarter and its operating profit reached 930 million euros, two figures that exceeded consensus expectations by 4% and 13%, respectively, according to Morgan Stanley.
Net banking income, at around 6 billion euros, beat expectations by around 2% while expenses – ie management fees – were slightly above consensus, at 1%. .
As for the net profit of 430 million euros, it clearly exceeded the consensus of 357 million euros.
At the divisional level, UBS emphasizes that the “Retail Banking, Private Banking and Insurance in France” division surprised particularly positively, with overall operating profit, certainly down 40.6% year-on-year to 281 million euros, but well above expectations. (181) billion euros).
“This is important because it is due to strong net interest income while this division should be the engine of the group’s profit growth until 2026,” notes the Swiss bank.
The CET 1 ratio was 13.1%, better than the 12.9% consensus, notes Morgan Stanley.
Share buyback beats expectations for SocGen
Distributions to shareholders also exceeded expectations with a dividend of 90 cents and a share buyback program of 280 million euros, while consensus was calling for a dividend of 87 cents and share buybacks of 184 million. The euro, again according to Morgan Stanley.
On the negative side, however, the growth objective turns out to be sensible: For 2024, Société Générale expects its revenue to grow by more than or equal to 5% while analysts expected an average increase of 7%, while the operating ratio, according to Bank of America, That means charges compared to net banking income, according to Morgan Stanley, are expected to be lower at 71% compared to the consensus of 67%.
“Fourth quarter results are generally volatile due to multiple exceptional items. However, we believe the bank’s profitability should decline this quarter,” Bank of America estimates.
The establishment specifically explains that the negative impact of hedges taken by Societe Generale to protect itself against a possible drop in rates on its net interest margin in retail banking should be mitigated in the future.
“Objectives for 2024 confirm a recovery in profitability, even if they fall short of consensus,” Bank of America added.
Julian Marion – ©2024 BFM Bourse
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