SocGen reports Q3 profit rise of 24% as investment bank rebounds

SocGen Reports 24% Profit Surge in Q3 Driven by Investment Banking Rebound

Societe Generale’s Third-Quarter Financial Performance Overview

By Mateusz Rabiega

Oct 29 (Reuters) - French bank Societe Generale reported higher-than-expected third-quarter net profit on Thursday, as soaring equities trading offset a sharp decline in fixed income and its retail bank benefited from higher lending income.

Key Financial Highlights

Group net income rose to €1.89 billion ($2.10 billion), up 24% from a year earlier, ahead of the €1.65 billion median of analysts' estimates polled by the bank.

RBC analysts said continued cost cutting combined with strong revenue performance puts the lender on track to exceed its annual profitability target.

Revenues came in beyond expectations, growing 8% on the year to €7.17 billion.

Investment Banking Recovery

After three consecutive quarters of disappointing trading revenues, SocGen's investment bank saw sales rise 13% in the three months to end-September - a welcome boost for CEO Slawomir Krupa as he seeks to extend one of Europe's most closely watched bids to turn around a lender dogged for years by high costs and weak profitability.

France's second-biggest listed bank last month lifted its key medium-term financial targets and vowed further expense cutting, in the second of Krupa's three-year strategy reviews since taking over in 2023.

SocGen joined rivals including BNP Paribas in beating forecasts, easing concerns that the European banking sector's recent profit boom is fading.

Cost Management and Expenses

It said costs in the most recent quarter edged up slightly to €4.1 billion, roughly €100 million more than forecast, mainly due to bonuses at its investment banking unit.

Trading Performance Breakdown

Equity Trading Offsets Fixed Income Slump

SocGen's trading arm enjoyed record-high equity sales, which soared 46%, close to BNP's 50%.

By contrast, fixed income revenue plummeted 21% year-on-year, worse than a 3% decline at Deutsche Bank and a 5% drop at Wall Street rivals.

SocGen's retail business reported an 11% rise in revenue as net interest income increased.

French Debt Exposure and Market Impact

French Debt Impact Limited

The lender said its exposure to French sovereign bonds was limited, with €7.2 billion of French government debt and €14.7 billion of public-sector loans on its books at end-September, compared with total assets of €982 billion.

Economic and Market Context

The French economy and companies face increased uncertainty after a wave of protests and riots over costs of living and school conditions rolled through the country, deepening worries about weakening public finances, higher borrowing costs, and dampened growth.

European banking shares have fallen sharply in the past month as soaring euro zone sovereign yields - especially in France - raise worries about lenders' exposure to a bond market selloff.

SocGen shares, one of the industry's best performers in recent years, are down 10% year to date and have fallen 26% since August, when they hit near 19-year highs.

Exchange Rate and Reporting Credits

($1 = 0.8993 euros)

(Reporting by Mateusz Rabiega in Gdansk; Editing by Tommy Reggiori Wilkes)