FINANCIALS: SocGen: Results Expectations Low, So Is Profitability

SocGen (SOCGEN: Baa2 neg/BBB/A- pos) results are due 1-Aug. The negative surprise on the conf call last time was unhelpful, such that expectations are likely to be low, we feel. Much as the bank is trying to simplify, profitability and growth remains weak, and consensus is discounting further IB market share loss this period.

• Previous results (3-May) looked reasonable on the face but mgmt indicated a weaker revenue outlook (on an ill-conceived hedge structure) which saw the equity hit hard during the conf call. Credit metrics looked relatively solid, however.
• The bank is making steps to simplify; it is selling Shine (digital neobank), its German consumer finance business (to CredAg) but the sale of the custody unit (to State Street) appears to have stalled. The French political backdrop has been unhelpful over the last quarter, but the overriding issue is SocGen’s poor profitability and growth.
• Spreads have broadly tracked €IG banks since those results, including over the last month. The equity, conversely, has underperformed by almost 15pp since then but have clawed back nearly 4pp in the last month.
• Revenue estimates have been broadly maintained but earnings estimates are down 2-3% for this year and next.

Results are usually out before 0600 (London time) and the conf call is scheduled for 0930 at: https://edge.media-server.com/mmc/p/noqsn9dr