Understanding our 2021 Q2 results
Letter to Shareholders N°127
Societe Generale enjoyed an excellent second quarter and more generally a very good first-half 2021, with a solid commercial and financial performance by all its businesses. These H1 results, the best for 5 years, illustrate the strength of the business model and the Group’s capacity to rebound.
Societe Generale enjoyed an excellent quarter and more generally a very good H1, with a solid commercial and financial performance by all its businesses. The results for H1 2021 are therefore the best for 5 years, illustrating the strength of the business model and the Group’s capacity to rebound.
Our Q2 revenues were up more than 18% thanks to the very good performances in Global Banking & Investor Solutions, the substantial growth in Financial Services and the rebound in Retail Banking. We also continued our disciplined management of costs. As a result, underlying gross operating income was considerably higher (+55%) in Q2. The quality of the loan portfolio resulted in a very low cost of risk this quarter, with few loan defaults and the continuation of a prudent provisioning policy. Our underlying Group net income totalled EUR 1.35 billion in Q2 and EUR 2.65 billion in H1. Our profitability (ROTE) exceeded 10% both in Q2 and H1.
These results are the fruit of extensive work undertaken for several years to enhance the intrinsic quality of the franchises by effectively anticipating the needs of customers, improve the operational efficiency of the Group and maintain the excellent robustness of the loan portfolio and risk management.
On these bases, we are raising our forecasts for full-year 2021. In a still uncertain health environment, but a more buoyant economic environment, we anticipate an increase in revenues for all our businesses in 2021. We also anticipate an increase in the positive jaws effect, with continued disciplined management of our costs. Finally, we have revised our cost of risk downwards.
With a very solid capital base, the Group wants to have an attractive shareholder return policy. Societe Generale has therefore confirmed the launch in Q4 of a share buyback programme, for an amount equivalent to the amount of the dividend payment last May, i.e. around EUR 470 million, subject to the final authorisation of the European Central Bank. The Group also made a dividend provision of EUR 1.2 per share in H1, an amount in line with a payout ratio of 50% of underlying Group net income.
Thanks to the exceptional commitment of its teams and a very solid balance sheet, the Societe Generale group is resolutely engaged in the execution of the strategic initiatives announced in recent months. The Group will pursue the far-reaching transformation of its businesses related to ESG (Environmental, Social and Governance) issues and the growing use of the new digital technologies. We will continue to incorporate ESG issues in the development strategy and management of all our businesses. The various transactions with an ESG dimension carried out during Q2 demonstrate our ability to innovate and play a leading role in this area, in all the businesses and all regions.
The Group has therefore resolutely embarked on the path of profitable and sustainable growth.
I would like to thank you again for your loyalty and the trust you have placed in our Group as well as your long-term commitment alongside us.
Chief Executive Officer