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 France's No. 2 listed bank has sold assets, cut jobs and pulled out
of markets like Greece and Egypt to meet tough new rules to
strengthen European banks after the financial crisis and the euro
zone's debt troubles.
The bank is aiming for a dividend payout ratio of 40 percent in
2014, up from 27 percent in 2013, SocGen's chief executive Frederic
Oudea told Reuters Insider television on Wednesday.
"We have accomplished the transformation of the balance sheet at
year-end 2013," Oudea said, adding the bank was able to increase
operating income, to benefit from a reduction in loan-loss
provisions and to use capital more effectively.
The bank, which reported 2013 results on Wednesday, had a core Tier
1 capital ratio of 10 percent at end-December under tough new global
rules, ahead of some rivals like Deutsche Bank <DBKGn.DE>.
While SocGen's dividends are on the increase, its bonus pool will be
down for 2013, Oudea said, after a 445.9 million euro fine over
attempted rigging of the Euribor benchmark rate wiped out investment
banking profits in the quarter.
Oudea said SocGen had learned its lesson from the crisis.
SocGen's bonus policy contrasts with UK bank Barclays <BARC.L>,
which hiked bonuses for bankers at the same time as cutting 12,000
jobs, angering politicians.
Oudea said SocGen might consider "small" acquisitions in the mould
of the derivatives-focused broker Newedge it agreed to take over
last year.
SocGen shares rose 5.8 percent to their highest level since May
2011, with investors and analysts pointing to the dividend outlook.
"The results are reassuring but the key point is the increase in the
dividend payout," said Yohan Salleron, fund manager at Mandarine
Gestion, who does not own SocGen shares. "This is a trend that will
start to be seen across the banking sector."
Other banks have already pledged higher dividends, including
Handelsbanken <SHBCM.UL> and SEB <SEBa.ST> in Sweden, National Bank
of Canada <NA.TO> and UBS <UBSN.VX> in Switzerland.
NET PROFIT ALMOST TRIPLES
SocGen reported a fourth-quarter net profit of 322 million euros
($440 million) on Wednesday, compared with a 471 million loss for
the same period in 2012. Loan-loss provisions were down by 20
percent, while writedowns on the acquisition value of assets were
cut by almost 90 percent.
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But there was a push in the quarter to increase provisioning against
non-performing loans in markets like Russia and Romania.
JPMorgan analyst Delphine Lee said this was a welcome sign ahead of
a health check by the European Central Bank.
Stripping out one-off costs and losses on toxic assets, SocGen's
fourth-quarter net income would have been 928 million euros, the
bank said, thanks to profit growth from retail banking in France and
abroad as well as corporate finance.
That compared with quarterly analyst expectations for a figure
closer to 623.3 million euros, according to the mean average of
analyst forecasts compiled by Thomson Reuters Eikon.
"There's nothing not to like in SocGen," Toby Campbell-Gray, head of
trading at Tavira Securities, said.
SocGen's 2013 net profit almost tripled to 2.18 billion euros from
790 million euros a year earlier. The bank proposed a 2013 dividend
of 1 euro per share, up from 0.45 euros in 2012.
Other banks are also bouncing back from the crisis. Dutch bank ING <ING.AS>
reported a 22 percent increase in underlying net profit for 2013 on
Wednesday.
SocGen has launched a new cost-cutting drive to meet an end-2015 10
percent return-on-equity target, versus an underlying ROE of 8.4
percent in 2013. The bank secured 350 million euros in recurring
cost savings in 2013, part of which will come from hundreds of job
cuts.
Rivals including Deutsche Bank and UBS are targeting ROEs — a
measure of profitability — in 2015-2016 of 12 to 15 percent.
SocGen's Oudea said there was no plan to increase his target.
(Additional reporting by Sudip Kar-Gupta
in London; editing by James Regan, Elizabeth Piper and Jane
Merriman)
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