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February 12, 2021updated 20 Feb 2021 6:03pm

Societe Generale posts 7.6% profit decline in 2020, but SGEF and ALD hold strong

By Alejandro Gonzalez

Societe Generale – the parent to the European leasing companies SGEF and ALD – demonstrated a “significant improvement” in its financial performance during the second half of 2020, against a net profit fall of 7.6% for the full-year 2020 (to €22.1bn), the French bank said in a statement.

Against this picture, the company’s auto and equipment finance divisions “delivered a resilient commercial performance” the company said.

After the first-half of 2020 was marked by the effects of the coronavirus health crisis and the dislocation of businesses, the Group’s overall performance improved significantly in H2, the bank said.

SocGen posted a CET1 ratio of 13.4%, around 440 basis points above the regulatory requirement.

Societe Generale is a universal bank with divisions supporting French Networks, Global Transaction Banking, International Retail Banking, Financial Services, Corporate and Investment Banking, Private Banking, Asset Management and Securities Services.

Q4 2020

The French bank reported a net profit of €470m in Q4 2020, ending 2020 with a net loss of €258m.

For Q4 2020, SocGen also reported

  • Revenues at €5.8bn, marking a 6% YoY fall on Q4 2019.
  • Operating expenses fell by 3.4% YoY.
  • The CET 1 ratio, a measure of bank solvency, was 13.4% from 12.7% YoY.

Nordea Finance

SocGen reported that last October it sold to Nordea Finance all its shares in SG Finans AS, a provider of equipment finance and factoring in Norway, Sweden and Denmark. The company employed approximately 360 people and the sale was expected to reduced SocGen’s balance sheet by €4bn, SocGen said.

Financial services to corporates

These units include a) operational vehicle leasing and fleet management; b) equipment and vendor finance. For this division, net banking income was down -2.1% in 2020, at €1.7bn. In Q4 2020, net banking income came to €459m, up +11.8% versus Q4 2019. 

Financial services to corporates “delivered a resilient commercial performance” the bank said in a statement.

SGEF & ALD Automotive

The number of contracts for operational vehicle leasing and fleet management was stable versus end-December 2019, at 1.76 million contracts at end-December 2020.

In 2020, the group’s fleet management and long-term vehicle leasing provider ALD Automotive posted a used car sale result (€201 per unit) above the guidance, while margins were higher in Equipment Finance

Societe Generale Equipment Finance’s outstanding loans were slightly lower (-0.8%) versus end-December 2019, at €14.1bn (excluding factoring).

Financing & Advisory revenues totalled €2.5bn in 2020, up +0.6% versus 2019 (stable at current structure and exchange rates), with the strengthening of the franchises and ongoing support for clients during this challenging year.

In Q4 2020, net banking income was €681m, up by +9.0% vs. Q4 2019 (+5.9% at current structure and exchange rates) and rebounding by +18.3% vs. Q3 2020. 

This increase reflects the good performance of asset financing activities, the asset-backed products platform and the recovery in global transaction and payment services. 

2021 outlook

The Group is aiming for a decline in underlying operating expenses from 2023, compared to 2020. 

In 2021, it will maintain strict discipline and target a positive jaws effect against the backdrop of an improvement in the economic outlook with a slight increase in its costs.

The 2021 cost of risk is expected to be lower than in 2020.

The Group aims to operate with a CET1 ratio more than 200 basis points above the regulatory requirement, including after the entry into force of the regulation finalising the Basel III reform whose impact is expected to be around €39bn as from 2023, or around 115 basis points

In 2021, the CET1 ratio is expected to be at a level significantly higher than 200 basis points above the regulatory requirement.

Frédéric Oudéa, the bank’s chief executive, said: “The Q4 results provide further confirmation of the rebound in our businesses observed in Q3 after a beginning of the year marked by the impacts of the Covid crisis.

“We are therefore entering 2021 with confidence and determination with, as a priority, the execution of our strategic roadmap.”

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