Half Year 2022 Societe Generale SA Earnings Call Transcript

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

Question: Delphine Lee - JPMorgan Chase & Co, Research Division - Analyst : So my first question -- I've got questions. My first question was on (inaudible). I mean you've presented the plan a while ago, but just wondering on the revenue side of it on a revenue assumption for this plan, what are you assuming? Has anything changed? And also kind of what rates and increase in rates impact do you have in the plan? And the second question is on Global Markets. The range for the revenue target is somewhat a little bit large. So just wondering what's the thinking behind this? What did it depend on this -- give us a little bit of color because the cost-income ratio is also somewhat large. So if you could help on these 2 issues, that would be great.

Question: Delphine Lee - JPMorgan Chase & Co, Research Division - Analyst : Yes. I was going to just clarify, Sebastien if you could follow up. On interest rate increases, I mean, given you have your rival coming down and rates coming down, does that mean in your plan, you have conservative assumption on rates? Just kind of wondering what we should be assuming here? Sebastien Proto - SociTtT GTnTrale SociTtT anonyme - Deputy GM and Head of the Societe Generale & CrTdit du Nord Private Banking Yes, correct. Correct. Again, it can be seen as a little bit conservative. But I mean, there is potentially an upside both in terms of return on equity and cost-income ratio. We have factored all the rates I've just been describing in the trajectory, which means that fundamentally we are on that basis don't plan for a sustainable support from rates because we are 0 for short-term rates in 2025 and long-term rates at 0.8%. So if you wish, it's a conservative assumption versus perhaps of the scenarios, of course.

Question: Omar Fall - Barclays Bank PLC, Research Division - Analyst : Firstly, thank you for the longer-term targets. But could you give some more idea on the near-term outlook for French retail revenues? Because there's a lot of challenges now. It looks like clean NII is down 6% this quarter actually the other line. There's EUR 80 million impact from (inaudible) to come in the second half. Loan growth should slow, I guess, and you've got this with (inaudible) issue on mortgage rates. So do you think that fees can stay strong enough to offset all of that? Then secondly, just in GBIS, just your financing and advisory business continues to have revenue trends that are nothing like your peers, including your closest peer, you had plus 14%. So could you explain what's happening there revenue-wise? And should we be comfortable that you're not deploying balance sheet into attend the macro environment as opposed to everyone else pulling out? Because I see the balances have gone up quite a bit in the quarter, the loan balances.

Question: Omar Fall - Barclays Bank PLC, Research Division - Analyst : And just on the Livret, just to be clear, the guidance is for around EUR 45 million, EUR 50 million for every 25 bps, is that right? Just to clarify that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 03, 2022 / 9:30AM, SOGN.PA - Half Year 2022 Societe Generale SA Earnings Call Sebastien Proto - SociTtT GTnTrale SociTtT anonyme - Deputy GM and Head of the Societe Generale & CrTdit du Nord Private Banking Yes, that's correct. Unidentified Company Representative On your SMA question. So the answer is very clearly no. You shouldn't be worried about us deploying capital counter-cyclically. We have been allocating more resources to this business as we stated this in May. We have been doing this very successfully for 2 reasons. And we explained this plans last year because we chose to invest on sectors that have strong, strong long-term growth trends in which we are particularly good at, right? I mean trends that are perfectly matched with our expertise and our long-term sector knowledge and ability to work in them. And so what you see is the effect of this extra capital allocation, which mostly happened last year at this stage, which was very well executed with a lot of focus from everyone. And so we are, because of that, because the cycle has continued to be strong for us, we are delivering. And you have to remember when you're comparing us to peers. And I do agree with you that we are doing better than some of our closer peers. But if you compare to the entire industry, you have to remember that our pure investment banking business, M&A, ECM, et cetera, is much smaller. So when you compare year-on-year, our performance is obviously held actually right now by us being very small in this segment of the market, which is crashing somewhat for some of our peers. And so the answer in terms of risk management or risk profile is that we have absolutely maintained the same criteria in terms of origination or risk management that you have seen us doing or opting for the last decades, and you see the performance in terms of risk management of this business in the last decades. And we absolutely intent on keeping it that way. 2 more fast comments, quick comments. One, in terms of transaction banking, which is part of SMA, we have also a very, very dynamic business there, which has been a focus of investments, et cetera, for years, accelerated recently. And so we are capturing the growth of the market there. And there is a positive impact of interest rates there, which we see immediately. It's very responsive, very sensitive to this positively. And so you have some of that upside there. And lastly, in terms of -- and Frederic mentioned this, in terms of S3, we don't have anything brewing and we have a very, let's say, at this stage, very comfortable position from that perspective.

Question: Jonathan Matthew Balfour Clark - Mediobanca - Banca di credito finanziario S.p.A., Research Division - Analyst : So a couple of questions. Firstly, on the French Retail Banking revenues in the second quarter compared to the first quarter. I still don't quite understand why net interest income declined so much and why the other income increased so much. So maybe you could talk about that specifically second quarter versus the first quarter and update us on what's in that other revenue line within the breakdown that you gave for French Retail Banking because there have been some scope changes in the last few years. So it feels as if the nature of that line may have changed. And then second question is just on the Securities Services division. When you had the GBIS a couple of years ago, you were quite subdued on that division. I think the comment was something like it was a breakeven activity for you and you are only forecasting around EUR 0.5 billion of revenues. And you're now tracking well above that. So I guess I'm just curious, do you now think that the recent run rate of revenues and Securities Services is sustainable? And what has changed since the GBIS and Investor Day? Is it just interest rates? Is it activity? Is it something else? So just some guidance that would be appreciated.

Question: Jonathan Matthew Balfour Clark - Mediobanca - Banca di credito finanziario S.p.A., Research Division - Analyst : Is it fair to assume you're more euro rate orientated than dollar rate orientated in that business? So whatever benefit you've seen from dollar so far should be bigger if we see euro rates move?

Question: Kirishanthan Vijayarajah - HSBC, Research Division - Analyst : Yes. A couple of questions, if I may. Firstly, can I just pick up on a comment that was made about LeasePlan that completing the deal by year-end was viewed as ambitious? I just wondered kind of what's changed, what's the bottleneck causing any potential delays that you're alluding to there? And how worried should we be about maybe some slippage there? And then turning to asset quality and specifically your residual Russia exposure, as you show on Slide 64. I'm just wondering on that $500 million residual exposure to Rosbank, what's the time line of that potentially falling away? Because I was under the impression that the new owner of REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 03, 2022 / 9:30AM, SOGN.PA - Half Year 2022 Societe Generale SA Earnings Call Rosbank had been placed on the sanctions list. So just some clarification on the tail risk there, please, on that residual EUR 0.5 billion exposure to Rosbank, please.