* Targets 3 pct rev growth/yr through 2016 at investor day
* Seeks to improve return on equity to above 10 pct in 2016
* Commits to long-term aims in Russia with ROE of 14 pct
* Targets 50 pct div payout ratio in 2016 vs 40 pct in 2014
* Shares down 1.2 percent in sector down 0.1 percent
(Adds CEO comments)
By Maya Nikolaeva and Matthias Blamont
PARIS, May 13 Societe Generale,
France's second-largest listed bank, is keeping faith with its
Russian investments as part of a plan to expand in overseas
markets, seeing strong growth prospects there and expecting
political tensions to eventually ease.
SocGen poured billions into Russia before the Ukraine crisis
in a bid to take advantage of a rising middle-income class, yet
international banks exposed to eastern Europe have been in
focus since Moscow annexed Ukraine's Crimea, triggering U.S. and
European Union sanctions.
The lender has taken a 525 million euro ($722 million)
writedown on its main investment there, Rosbank, but its
management was upbeat on its Russian prospects during a day of
investor briefings in Paris on Tuesday.
"Of course we understand that there are risks of tensions
(in Russia) ... but we have a development plan that limits the
risk for Societe Generale," Chief Executive Frederic Oudea told
journalists, adding the bank believed that the parties engaged
in the conflict did not want it to escalate.
SocGen said it intends to maintain its exposure to Russia at
a "moderate level" of 3 percent of outstanding loans.
It expects to achieve a 14 percent return on equity in
Russia by 2016, down from 15 percent under a previous plan but
well above the group-wide target set at above 10 percent by end
2016, up from 8.4 percent last year.
"The return on equity (RoE) target seems more or less
coherent with other Russian banks," said Andrey Klapko, an
analyst at Gazprombank in Moscow. Russia's second-biggest bank
VTB for instance targets a 15 percent RoE in 2016.
SocGen aims to continue to derive a quarter of revenue from
fast-growing emerging markets.
"International banking and financial services will be one of
the group's main growth engines," the bank said in a
presentation, adding that only modest growth was expected in the
mature retail banking markets of France and the Czech Republic.
On a group-wide basis, SocGen targeted 3 percent revenue
growth over the next three years, a recovery from last year's
1.2 percent decline but broadly in line with its French rivals
and also in line with analyst expectations.
The bank plans to finalise a 1.45 billion euro ($2 billion)
cost-cutting programme in 2015 and cap the rise in expenses at 1
percent a year, in a bid to improve profitability in an
environment of slow growth in western Europe.
SocGen also aims to increase the dividend payout ratio to 50
percent in 2015 from 40 percent in 2014.
Shares in SocGen were little changed after the presentation,
down 1.2 percent in a European banking sector which
eased 0.1 percent.
"No scoop, all 2016 targets are already roughly in line with
consensus," a Paris-based trader said. "The only positive is
the (dividend) payout. These targets should not trigger massive
consensus adjustments though".
French rival BNP Paribas has said it aims to
deliver a double-digit percentage revenue rise over the next
three years versus 2013 and an improved return on equity of 10
percent by 2016 - similar to SocGen's targets.
Credit Agricole, more domestically focused than
the other two, has forecast 2.5 percent annual revenue growth
SocGen's corporate and investment bank, which is
traditionally weighted more towards equities trading than fixed
income, sees 1 percent annual growth in market activities. The
bank said it will maintain a "well-balanced" capital allocation,
with the share of market activities limited to 20 percent.
A number of banks across Europe have revised their
investment banking operations and exited entire product lines in
pursuit of a more stable earnings flow in the aftermath of the
SocGen said it was well positioned to gain market share,
taking advantage of increasing demand for direct lending and
post-trade services thanks to the acquisition of brokerage
It plans to maintain its common equity Tier 1 ratio, a key
measure of financial strength, at 10 percent, which would
translate into around 4 billion euros of excess capital which
would be available for organic growth, acquisitions or share
($1 = 0.7270 Euros)
(Editing by Andrew Callus and David Holmes)