Why Société Générale tumbles onto the Paris Stock Exchange
The Paris Stock Exchange does not appreciate the numbers and objectives of Société Générale, the banking group chaired by Bini Smaghi and now led by Krupa. Facts, numbers and comments
The Paris Stock Exchange punishes the Société Générale stock, which lost up to 11% during the day. Here's how and why.
THE NEW OBJECTIVES OF THE BANKING GROUP NOT WELCOMED BY THE PARIS STOCK EXCHANGE
Société Générale is targeting slower average annual revenue growth between 2022 and 2026 than released estimates for 2021-25 and aims to rationalize its portfolio and reduce exposure to oil and gas as part of a new strategy.
In particular, today the French bank outlined its new strategic plan until 2026 which, according to CEO Slawomir Krupa, will strengthen the group with a simplified business portfolio.
THE NUMBERS OF THE NEW COMPANY HEAD
Société Générale said it is targeting average annual revenue growth of between 0% and 2% over the 2022-26 period. For the period between 2021 and 2025, the bank aimed to achieve average annual revenue growth of at least 3 percent.
The institution also aims to achieve a tangible return on equity, a key profitability parameter (ROTE), of between 9% and 10% and a Cet 1 Ratio of 13 percent.
LOWER OBJECTIVES THAN TARGETS FOR 2025
The first business plan signed by the new CEO of Société Générale, Slawomir Krupa, disappoints investors and the banking group's shares slip by 6.5% on the Paris Stock Exchange and lost up to 11% during the day. The new strategies announced by the manager who has been leading the group for a few months include an average annual growth in revenues of between 0% and 2% in the 2022-26 period, a cost income to be brought back below 60% at the end of the plan, a return on tangible capital by 2026 between 9% and 10% and the distribution of dividends in the range of 40%-50% of reported net profit.
These objectives are slightly lower than the 2025 targets that the bank had confirmed in February during the presentation of the results of the last financial year: on that occasion the management had indicated a cost/income lower than 62% in 2025 and a return on capital tangible around 10%, while the share of profit distribution to shareholders was indicated at 50%.
WHAT THE REPORTS SAY
According to Citi analysts, the targets provided by the management are largely in line with the consensus of the investment houses, we read on Radiocor-Sole 24 Ore : the focus is placed more on efficiency than on revenue growth with attention to cash generation, but without reference to any disposals of assets. According to Citi, the execution of the plan will be the key factor, but the strategy is credible and can provide support for a revaluation of the stock.
HOW SOCIÉTÉ GÉNÉRALE'S SHARES ARE FACING
Last week the shares of Société Générale reached their highest levels since March. From the beginning of the year until the close of Friday, prices rose by approximately 13% compared to +14% of the Cac40 and +12% of the Stoxx600 in the banking sector.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/societe-generale-calo-borsa-parigi/ on Mon, 18 Sep 2023 12:45:11 +0000.