Understanding our second quarter 2022 results
Letter to shareholders n°132
The second quarter of 2022 concluded two years of intense and disciplined execution of our various strategic projects. In the first half of 2022, we combined strong growth in revenues and underlying profitability above 10%.
The second quarter of 2022 concluded two years of intense and disciplined execution of our various strategic projects. We have successfully simplified and strengthened the resilience of our business model, transformed our businesses to support the changing needs of our customers and the far-reaching transformations around digital technologies and CSR1, and invested in a targeted manner in businesses with strong growth potential. We combined, in the first half of 2022, strong growth in revenues and underlying profitability above 10% (ROTE).
Revenues were 12.8%2 higher this quarter, driven by record levels for numerous businesses (Private Banking, Financing & Advisory, ALD and International Retail Banking), robust Global Markets activities and the continued healthy commercial momentum in French Retail Banking. We continued to maintain strict discipline on operating expenses and our underlying cost to income ratio, excluding the Single Resolution Fund, improved by more than 3 points to 61.8%. The cost of risk remains low at 15 basis points, reflecting the quality of our loan portfolio.
Underlying Group net income totalled EUR 1.5 billion in the second quarter and EUR 3.1 billon in the first half. Underlying profitability (ROTE) therefore stood at 10.5% in the second quarter and 10.8% in the first half. As we announced previously, we accounted this quarter the impacts of our withdrawal from Russia (EUR -3.3 billion before tax). Consequently, reported Group net income was a loss of EUR -1.5 billion in the second quarter and EUR -640 million in the first half. As expected, we were able to absorb the impact of this disposal, and our capital level remains stable compared to end-March 2022, and robust at 12.9%3, well above regulatory requirements. In the first half, this capital ratio includes a distribution provision corresponding to EUR 1.44 per share, an amount in line with a distribution of 50% of underlying Group net income4.
On the occasion of the publication of these results, we have reiterated and specified the ambitions and objectives for the Group and our businesses. By 2025, having reaped all the benefits of the numerous strategic and operating efficiency initiatives under way, we confirm our ability to deliver profitability of 10% on the basis of a target capital (CET1) ratio of 12%, while maintaining an attractive distribution policy for our shareholders, of 50% of underlying Group net income5. This distribution includes a dividend component and a share buyback component representing up to 40% of the total distributed.
We have also reaffirmed our ambitions in terms of CSR commitments and innovation & digital strategy. In addition to the acceleration of our sustainable financing targets, which now stand at EUR 300bn for the period 2022-2025, our CSR ambition will be based in particular on a vast training plan for all the Group’s employees and proactive support for all our customers, large corporates as well as SMEs, professional and individual customers. We also want to accelerate our digital and technological transformation. Our IT strategy aims to better serve our customers in terms of digital offering and customer experience and to continue to increase our efficiency and reactivity. The Group also wants to build the bank of the future by developing new, differentiating and value-creating business models, as we did with Boursorama or ALD.
In the uncertain and complex, economic and political environment we are experiencing, the Group has solid commercial and financial fundamentals. It will resolutely pursue the implementation of its roadmap which creates value and drives sustainable and profitable 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
(1) CSR: corporate social responsibility
(2) 13.4% adjusted for changes in Group structure and at constant exchange rates
(3) Phased-in ratio (fully loaded ratio of 12.8%)
(4) After deduction of interest on deeply subordinated notes and undated subordinated notes. This distribution may include a share buyback component.
(5) After deduction of interest on deeply subordinated notes and undated subordinated notes
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