PARIS Societe Generale (SOGN.PA) is to return more cash to shareholders in 2014 than last year after completing a long-running overhaul of its balance sheet.
France's No. 2 listed bank has sold assets, cut jobs and pulled out of markets like Greece and Egypt to meet tough new rules to strengthen European banks after the financial crisis and the euro zone's debt troubles.
The bank is aiming for a dividend payout ratio of 40 percent in 2014, up from 27 percent in 2013, SocGen's chief executive Frederic Oudea told Reuters Insider television on Wednesday.
"We have accomplished the transformation of the balance sheet at year-end 2013," Oudea said, adding the bank was able to increase operating income, to benefit from a reduction in loan-loss provisions and to use capital more effectively.
The bank, which reported 2013 results on Wednesday, had a core Tier 1 capital ratio of 10 percent at end-December under tough new global rules, ahead of some rivals like Deutsche Bank (DBKGn.DE).
While SocGen's dividends are on the increase, its bonus pool will be down for 2013, Oudea said, after a 445.9 million euro fine over attempted rigging of the Euribor benchmark rate wiped out investment banking profits in the quarter.
Oudea said SocGen had learned its lesson from the crisis.
SocGen's bonus policy contrasts with UK bank Barclays (BARC.L), which hiked bonuses for bankers at the same time as cutting 12,000 jobs, angering politicians.
Oudea said SocGen might consider "small" acquisitions in the mould of the derivatives-focused broker Newedge it agreed to take over last year.
SocGen shares rose 5.8 percent to their highest level since May 2011, with investors and analysts pointing to the dividend outlook.
"The results are reassuring but the key point is the increase in the dividend payout," said Yohan Salleron, fund manager at Mandarine Gestion, who does not own SocGen shares. "This is a trend that will start to be seen across the banking sector."
Other banks have already pledged higher dividends, including Handelsbanken SHBCM.UL and SEB (SEBa.ST) in Sweden, National Bank of Canada (NA.TO) and UBS UBSN.VX in Switzerland.
NET PROFIT ALMOST TRIPLES
SocGen reported a fourth-quarter net profit of 322 million euros ($440 million) on Wednesday, compared with a 471 million loss for the same period in 2012. Loan-loss provisions were down by 20 percent, while writedowns on the acquisition value of assets were cut by almost 90 percent.
But there was a push in the quarter to increase provisioning against non-performing loans in markets like Russia and Romania.
JPMorgan analyst Delphine Lee said this was a welcome sign ahead of a health check by the European Central Bank.
Stripping out one-off costs and losses on toxic assets, SocGen's fourth-quarter net income would have been 928 million euros, the bank said, thanks to profit growth from retail banking in France and abroad as well as corporate finance.
That compared with quarterly analyst expectations for a figure closer to 623.3 million euros, according to the mean average of analyst forecasts compiled by Thomson Reuters Eikon.
"There's nothing not to like in SocGen," Toby Campbell-Gray, head of trading at Tavira Securities, said.
SocGen's 2013 net profit almost tripled to 2.18 billion euros from 790 million euros a year earlier. The bank proposed a 2013 dividend of 1 euro per share, up from 0.45 euros in 2012.
Other banks are also bouncing back from the crisis. Dutch bank ING ING.AS reported a 22 percent increase in underlying net profit for 2013 on Wednesday.
SocGen has launched a new cost-cutting drive to meet an end-2015 10 percent return-on-equity target, versus an underlying ROE of 8.4 percent in 2013. The bank secured 350 million euros in recurring cost savings in 2013, part of which will come from hundreds of job cuts.
Rivals including Deutsche Bank and UBS are targeting ROEs - a measure of profitability - in 2015-2016 of 12 to 15 percent. SocGen's Oudea said there was no plan to increase his target.
(Additional reporting by Sudip Kar-Gupta in London; Editing by James Regan, Elizabeth Piper and Jane Merriman)