Understanding our third quarter 2022 results
Letter to shareholders n°133
In an increasingly complex geopolitical and economic environment, Societe Generale again enjoyed a strong quarter, with both a solid commercial performance and profitability. We also continue to make good progress on the execution of our strategic initiatives.
In an increasingly complex geopolitical and economic environment, Societe Generale again enjoyed a strong quarter, with both a solid commercial performance and profitability.
The increase in net banking income of 2.3% in the quarter, compared with a high reference base in Q3 2021, illustrates the robust commercial performance of the businesses. The revenues of International Retail Banking & Financial Services were substantially higher, Global Markets and Financing & Advisory delivered another good performance and the revenues of French Retail Banking showed resilience, whereas this activity has not benefited immediately from the rise in interest rates contrary to what is observed in other European markets. We continued to maintain strict discipline on operating expenses and our cost to income ratio improved to 60.7%1 in the quarter. The quality of our loan portfolio remains very sound, which resulted in a cost of risk contained at 31 basis points in the quarter, with a limited level of defaults and a prudent provisioning policy, enabling us to further strengthen our reserves. We confirm that we expect the cost of risk to be between 30 and 35 basis points for 2022.
Group net income totalled EUR 1.4 billion on an underlying basis and EUR 1.5 billion on a reported basis in the quarter. As a result, underlying profitability (ROTE) stood at 10.5% in the quarter.
With a CET1 ratio of 13.1%2, our level of capital remains very solid and well above the regulatory requirement. The increase compared with end-June can be explained primarily by organic capital generation during the third quarter. This capital ratio includes a distribution provision (dividend and share buyback) corresponding to 50% of underlying Group net income (or around EUR 2.3 per share)3.
We have continued to make good progress over the last few months in the execution of our strategic initiatives, with several major milestones achieved. Accordingly, we obtained the regulatory agreements for the merger of our retail banking networks in France and the legal merger will take place on January 1st, 2023 as planned. With regard to Boursorama, the exclusive offering reserved for ING France customers4 ended successfully on September 30th and two-thirds of customers eligible for the partnership with ING have migrated their accounts to Boursorama Banque. As for the planned acquisition of LeasePlan by ALD, the regulatory authorisation processes are well underway, the capital increase is expected to be implemented before the end of the year and the finalisation of the acquisition is expected during the first quarter of 2023.
As you know, Societe Generale has placed CSR issues and particularly the environmental transition at the heart of its ambition and its strategic roadmap for 2025. At end-October, we announced that we are accelerating the decarbonisation of our loan portfolios. Accordingly, we have set new more ambitious intermediate targets, covering the electricity, oil and gas production sectors and we continue to work on other sectors.
After 14 years at the head of Societe Generale, at our last General Meeting I announced that I will not seek the renewal of my mandate as Director and Chief Executive Officer, which expires in May 2023. With the implementation underway of several strategic projects, a new cycle will begin for the Group and I believe that a new CEO should take the helm of our great company with time ahead of them to maximise the full potential of this new business model in a disruptive geopolitical, economic and financial environment. On September 30th, the Board of Directors decided that at the next General Meeting it would propose Slawomir Krupa as Director to succeed me as Chief Executive Officer of the Group in May 2023. The coming months will enable us to continue to implement these strategic initiatives while together ensuring an effective transition.
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) Underlying data, excluding contribution to the Single Resolution Fund
(2) Phased-in ratio (fully-loaded ratio of 12.9%)
(3) After deducting interest on deeply subordinated notes and undated subordinated notes
(4) Following ING’s decision to terminate its retail banking activity in France by end-2022, Boursorama Banque and ING concluded a partnership agreement on April 5th 2022 with a view to offering the best alternative banking solution to ING customers in France, with a simplified account opening process, exclusive commercial gestures and dedicated support
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