Full Year 2024 Societe Generale SA Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tarik El Mejjad - BofA Securities - Analyst : Congrats for these results. Welcome Leopoldo; what a great way to start. So now I think on the French Retail, it's clear that you have turned the corner and your comments in the presentation on this division were very clear. So I'll focus my two questions on capital and capital distribution, which I think is your next leg of the rerating story, to be honest. So first of all, as we discussed a few times, Slawomir, so if I do the math on capital trajectory, so if I include all the proceeds from the disposals already announced and yet to close in first half, I take pro forma Basel IV, including FRTB. That should already position you at above or at 13% Basel IV CET1 in Q2 results. Would that seem realistic that we expect more share buyback distribution from second half this year? I think your comments on slide 6 says it all. Proactive management, sustainable excess capital above 13% and Basel IV in the interest of shareholders, distribution shareholders and profitable disciplined growth. I mean, for me, the interest of investors at these multiples is share buyback. I would like to hear you from this. Will you formalize actually the distribution policy more precisely with that aspect? Second question is still on capital. I think there are two divisions that have in my sense, non-satisfactory returns: Financing and Ayvens. I don't think this is mainly due to intensive -- capital-intensive nature. So for the Financing, you have Brookfield projects, more securitization. So can you tell us what more you can do there to control RWAs? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00AM, SOGN.PA - Full Year 2024 Societe Generale SA Earnings Call And for Ayvens -- sorry if it's a provocative question, but you mentioned that it will add value and you will do something in there. What kind of management actions should we expect? Something more milder similar to the Brookfield deal on the Financing? Or should we think further of potentially selling a stake to deconsolidate and have noncontrolling stake, which will release a lot of pressure on your balance sheet? Sorry for the long question. I'm interested to hear your answers. Thank you.

Question: Tarik El Mejjad - BofA Securities - Analyst : Okay. If I may just follow up on your first part -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00AM, SOGN.PA - Full Year 2024 Societe Generale SA Earnings Call

Question: Tarik El Mejjad - BofA Securities - Analyst : Okay. Then I'll pass on to my next colleague.

Question: Flora Benhakoun Bocahut - Barclays Bank - Analyst : I actually would like to discuss French Retail Banking, both on the revenues and then on the cost side as well. On revenues, I mean, thank you for all the guidance you give us for 2025. There is obviously a lot of focus still on French retail specifically. So I was wondering if you could help us maybe better navigate what your expectations are there in terms of revenues, specifically in 2025? What are the assumptions you would make? What are the main moving parts? What can we expect in terms of revenues basically there? And then on the cost side, I mean, despite the improvement, we're still looking at a business that is single-digit RONE, a cost income target for 2026 that looks difficult to achieve below 60%. So there is still the possibility maybe that you may consider additional cost cutting in that business. One of your peers actually announced that earlier this week. So how should we think about the risk of restructuring charges there? Is there a way for you to cut costs in kind of a soft way without incurring significant charges via, for example, the natural attrition and without impairing the revenue generation capability? Thank you.

Question: Giulia Miotto - Morgan Stanley - Analyst : My first question will be a clarification on slide 6. It's great to see a clear strategy on excess capital distribution. Can I just check though, when you say 13% pro forma post-Basel IV, what do you mean exactly by Basel IV, i.e., do you also include the output floors or those are not included? Because we always talk about the day-one impact. But at some point, we also have got to think about the later days impact. And then secondly, perhaps to stick to capital. Towards the second half of last year, there was a very nice pace of disposals announced, and it has -- headlines have gone quiet, and we haven't heard much since. What is next on your schedule? Do you still expect more disposals to come throughout this year as you continue to optimize your footprint? Thank you.

Question: Delphine Lee - JPMorgan Chase & Co - Analyst : I just wanted to go back on the distribution -- sorry, on the additional share buyback. So is the decision just dependent on FRTB? So say, you get more clarity by midyear or at the end of the year, and this is the trigger because, I mean, the intention is to be above 13%, I think, for the whole year anyways, right, in '25 in terms of CET1. So is it a fair assumption to assume we are going to get exceptional buybacks in '25? And my second question is just on organic growth. Now that you're at your target in terms of capital, is RWA growth is going to pick up a little bit more? Or is the intention to still keep it below 1% as per the business plan? Thank you.

Question: Alberto Artoni - Intesa Sanpaolo Equity Research - Analyst : Just two of them, one on BoursoBank and -- could you please give us a little bit more color on what are the levers that you can pull? I guess, it's just reducing the number of new customers that you want to acquire once you reach the EUR8 million threshold. But if you can just give a little bit more color in terms of -- for letting us understanding what is the earning power of BoursoBank? I know there is a guidance for EUR300 million in '26, but perhaps it can be a little bit more given the strong performance that the business has been demonstrating in the last quarters. And the second one is on transformation cost. Just a clarification. I think there was -- and correct me if I'm wrong, an indication about EUR1 billion between 2024 and 2025. Is this guidance still valid? Should we consider that just '25 is way below '26 what should we think in terms of transformation cost for '25? Thank you.

Question: Jonathan Matthew Clark - Mediobanca - Banca di credito finanziario S.p.A. - Analyst : Two questions, please. Firstly, on the capital trajectory, could you just confirm whether there are any kind of model updates? I think last year, there was some talk of on-site inspections or EBA guideline kind of headwinds to think about in the coming years? And then a nerdy question on the GBIS division. On slide 61, you show the currency and scope adjusted growth year-on-year, but I'm guessing that doesn't adjust for the Bernstein acquisition. So could you give us what the impact of the Bernstein acquisition was on those key growth lines for revenues and costs or quantify the contribution from Bernstein in 2024 in euro million terms, please?

Question: Chris Hallam - Goldman Sachs Group, Inc. - Analyst : I just have two broader questions left. First of all, taking a step back, if you compare to the summer last year, your share price is up around 65%. CDS has tightened quite meaningfully. Those moves obviously reflect improved performance in the business. How has that changed the tone of conversations with corporate clients, with supervisors, with counterparties? Are there parts of the group where it's almost easier to go out and do business now that those external reference points are on a much, much firmer footing? And then secondly, Slawomir, congratulations on the -- your recent election as the new EBF President. I'd be interested to hear what you see at the top of the agenda for the industry more broadly as you kind of kick off that 2-year term, particularly around regulation and competitiveness. I know we've talked about FRB a lot on this call already and whether you think there's political will and appetite to actually make tangible progress on these points.

Question: Jason Napier - UBS Investment Bank - Analyst : two quick ones. First of all, just as a point of fact, Slawomir, can I just check that you still have the guidance of the CMD of RWA growth below 1%. The earlier question around investing at marginal ROTEs that are attractive. I wonder whether you were just talking about inorganic potential opportunities or whether you have actually dropped the RWA guidance from the earlier event? And then secondly, I think the emphasis that you bring to granular execution and long-run improvement in the firm is, I think, what investors really want to hear. I just wondered whether you might talk about where you think the resting ROTE is for the group on a fully restructured and recovered base, one of your peers clearly this week directing attention to further out in the next few years, potential a couple of hundred basis points in ROTE performance. Where do you think the right destination is for SocGen on its current perimeter?

Question: Pierre Chedeville - CIC Market Solutions - Analyst : two questions on my side. First, a follow-up question regarding the distribution and what you said about Brookfield, et cetera. I was just wondering if you could tell me if you have any target regarding your outstanding in the CIB. I see that you have close to EUR180 billion there. What is your view on that? Is it an amount that you think is satisfying? Or could you think -- do you think that you could lower this big amount to improve your profitability maybe? And regarding the distribution, I remember that when we met in London for a nice dinner, you began the conversation with the interim dividend. You had a lot of questions there, it seems, and you ask why? And it seems to me, if I remember well, that you said that you were not theoretically opposed for an interim dividend, and we have seen one of your main competitor in France opt for that. I would like to know what is your -- the state of your mind regarding this point.

Question: Kirishanthan Vijayarajah - HSBC - Analyst : A couple of questions from my side. So firstly, on the UK motor and finance provision. If I look at the Ayvens slide, it looks like the majority of the exposure actually comes via LeasePlan. And I wonder, is there any recourse to the former private equity owners of LeasePlan to maybe claw some of that back. And obviously, most of that business or all of that business would have been written before LeasePlan was acquired by SocGen and Ayvens. I appreciate the provision itself isn't that large for now, but obviously, the range of possible outcomes people talk about is still pretty wide. So any kind of offset or clawback in the original acquisition terms? And then secondly, just a very quick clarification. I think you mentioned EUR35 million attrition to -- from the sale of the Private Banking businesses. Was that total revenues or just on the NII line, that EUR35 million per quarter?

Question: Pierre Chedeville - CIC Market Solutions - Analyst : I think for the moment, we cannot comment on this. We are still reviewing the legal terms, but there's no communication we can make at this point.

Question: Anke Reingen - RBC Capital Markets - Analyst : I just -- one follow-up question to Kiri's question. When you talk about the capital uncertainty in the course of 2025, is the motor and finance part, is that one of the potential areas of uncertainty as well with respect to the capital? Or you think it's just potentially even in the harsher case could be immaterial to matter? And then on slide -- on the 2025 guidance, just to confirm, when you give the disposal impact, is that on a full year basis? Or is it basically depending on when you expect the deals to close? And one sneaky additional question on your tax rate guidance. What do you expect for 2025 depending on -- and as a function of the French budget? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00AM, SOGN.PA - Full Year 2024 Societe Generale SA Earnings Call

Question: Anke Reingen - RBC Capital Markets - Analyst : Yes, if the outcome on the motor finance-- when you talked about switching from your above 13% to the 13% threshold on capital, you were saying that's a function of uncertainty being removed and you pointed to FRTB. But would the motor finance element or discussions outcome be one of the -- is it material enough to -- for you to be a factor to consider to the 13%?

Question: Anke Reingen - RBC Capital Markets - Analyst : And the tax rate, please.

Question: Joseph Dickerson - Jefferies - Analyst : It's Joe Dickerson here. Just a couple of questions for me. In terms of balance sheet growth because that's been, I think, also one of the problems behind the revenue momentum. But if I look in the fourth quarter, you had about EUR13 billion quarter-on-quarter pickup in GBIS loans. I guess what drove that demand? Because it was also healthy year-on-year. And then when we look at the -- some of the higher frequency data in France, it looks like mortgage production has picked up quite healthily in the first quarter. So I guess if you could discuss the demand dynamics in GBIS and then the start of the year in the French mortgage, if you're able. And then on BoursoBank, what's the impact, if any, in Q4 that you saw from the Bourso first launch? And do you expect that to be a meaningful contributor this year? Because it seems like you'll reach your 8 million customer target at the half year, and we can then start to see some, I guess, augmented profit growth from there in the second half of the year, hopefully.

Question: Joseph Dickerson - Jefferies - Analyst : Great. Just on the first part of my question, I was actually referring to the gross loans up EUR13 billion quarter-on-quarter. But I think we got the answer in the end, which was it sounds like the incremental demand is coming globally and across infrastructure, if I'm not -- if I understood correctly. I wasn't referring to the -- okay. I wasn't referring so much to the capital consumption more that there's -- it looks pretty well set up for revenue growth for 2025.

Question: Sharath Kumar - Deutsche Bank AG - Analyst : I have 2. Firstly, on Global Markets. I wanted to understand the reasons for the slightly lower growth than peers in both equities and fixed income. I would imagine capital being the main constraint or is there more to it? In the same sense, I wanted to check your appetite to increase capital allocation to this division in the light of the criteria that you listed earlier, I would think that Global Markets fit that criteria. Again, I ask this in the context of where consensus expectations for 2025 currently is it's well above your midpoint of your guidance. So on that, it will be useful. And a clarification again on Slide 9 on the cost impact. Can you break it up by division? I think it will be useful for our modeling. I think there is enough clarity on revenues, EUR270 million from Private Banking, EUR400 million from Equipment Finance, but anything more and also on costs would be helpful to get a better handle on modeling.

Question: Jacques-Henri Gaulard - Kepler Cheuvreux - Analyst : Question on cost really, and sorry to go on that. You're saying Slawomir, that the cost/income ratio evolution is linear. But at the end of the day, not quite. -- if the, I would say, cost income ratio target is less than 66%, and we need to go below 60%, it's quite a tough ask. And I totally appreciate also in this context, the minus 1% you have 25% versus '24. But if I restate it from the EUR300 million, I would say, gain from the cost to achieve, the cost will be up by EUR100 million, which is still quite a good performance. But are you nonetheless confident about the fact that it's not too much of a big mountain to climb? I appreciate the effort you're doing, but it's difficult to remove spots from the leopard. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 10:00AM, SOGN.PA - Full Year 2024 Societe Generale SA Earnings Call