SocGen and ING beat forecasts, but face more EM risk
Wednesday, February 12, 2014 - 02:46
Feb.12 - SocGen doubles its dividend payout and ING beats its Q4 earnings targets. But both banks could face an increasing level of risk from emerging markets. Ciara Sutton reports.
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Swinging to fourth quarter profit - French bank Societe Generale vows to return more cash to shareholders in 2014.
It comes after France's second-largest bank capped a long-running push to boost the strength of its balance sheet.
It sold assets, cut jobs and pulled out of markets like Greece and Egypt.
And it was good news too for Dutch bank ING, also reporting better than expected results.
It's in the final stages of restructuring and will review early repayment of its final tranche of state aid after selling its insurance business and completing crucial European banking tests.
This could pave the way to resume dividend payments that were halted after its bailout in 2008.
The news saw shares in the group surge over 3 percent in early trade.
IG's Alastair McCaig says the banks' strategies have paid off.
(SOUNDBITE) (English) MARKET COMMENTATOR, IG, ALASTAIR MCCAIG, SAYING:
"When we look at some of these European banks and compare them to UK banks, there is a sizeable difference I guess in their exposure to mortgages and the fines that have been incurred there in. The mis-selling of PPI are heavily linked to the mortgage scene, so SocGen and ING have managed to, to a certain extent, avoid those pitfalls."
But concerns remain about European banks' exposure to emerging markets, where they've loaned in excess of $3 trillion, more than four times U.S. lenders.
This puts them at far greater risk if financial market turmoil in countries such as Turkey, Brazil, India and South Africa intensifies.
(SOUNDBITE) (English) ALASTAIR MCCAIG, SAYING:
"I think all European banks, whichever side of the channel they may be, are going to face some bad debts coming their way from emerging markets. Due to the fact that we really are a couple of steps down that road of the US Fed tapering back its quantitative easing process. And that looks very much like its going to continue at a fairly healthy pace.
But SocGen's CEO Frederic Oudea optimistic about growth in 2014.
(SOUNDBITE) (English) SOCIETE GENERALE, CEO, FREDERIC OUDEA, SAYING:
"I think you might have volatility. At the end of the day we remain overall relatively positive for 2014, with growth in the world marginally better than last year, in particular in the euro zone. Again there can be some volatility, some emerging markets can grow a little bit less. And maybe sometime that's good - to avoid a bubble in the debt sometimes."
But many feel emerging market exposure could be a headache for the industry, just as it faces a rigorous health-check by the European Central Bank.
The so-called stress tests aims to expose weak points and restore investor confidence in the wake of the 2008 financial crisis, with results published in October.
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