SocGen profit beats estimates due to rise in consumer banking earnings

Société Générale reported fourth-quarter profit that exceeded estimates, helped by a surprise jump in earnings from French consumer banking. The lender announced plans for an initial public offering (IPO) of its car-leasing business ALD.

Net income was €390 million, down 41 per cent from a year earlier but above the €315 million average estimate of seven analysts surveyed by Bloomberg. Costs, including a charge tied to the sale of a Croatian unit, weighed on the results.

European lenders have struggled to increase profit amid record-low interest rates, tepid economic growth and tougher capital rules. In the final three months of 2016 Société Générale benefited from lower provisions for bad loans, improved trading conditions and better results from Russia and Africa.

The IPO will give ALD the opportunity “to seize potential growth or potential acquisitions”, deputy CEO Severin Cabannes said in an interview on Bloomberg Television. “Société Générale will remain the controlling shareholder and main funding provider of ALD.”

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In the fourth quarter profit at the French retail unit unexpectedly rose 25 per cent to €402 million, helped by cost reductions and lower loan-loss provisions. The result surpassed the average estimate of €290 million in a survey of analysts by Bloomberg News. Société Générale announced at the end of 2015 an intention to cut 20 per cent of its branches by 2020, while luring more clients to Boursorama, its online bank.

The results "reflect good commercial and operational performance in all the businesses and rigour in controlling costs and risks," chief executive Frederic Oudea said in the statement.

Interest rates

Interest rates will probably remain low in Europe this year and the

European Central Bank

will maintain its current policies as France, the Netherlands and Germany face elections, Mr Cabannes said. At Société Générale’s French consumer-banking unit, mortgage refinancing “will have an impact” in 2017, but probably less than last year, he said.

Net income from global banking and investor solutions, which includes trading and investment banking, rose 51 per cent to €432 million as the lender wrote back provisions it had set aside previously.

Earnings beat the average estimate of analysts compiled by Bloomberg News. Equities trading revenue rose 13 per cent to €509 million, topping estimates, while fixed-income sales climbed 6.8 per cent to €551 million, missing estimates. –

(Bloomberg)