February 8, 2018 / 5:53 AM / a year ago

French bank SocGen produces unexpected fourth quarter profit

PARIS (Reuters) - Societe Generale (SOGN.PA) on Thursday reported an unexpected profit in the fourth quarter, beating forecasts that the French bank would make a loss partly due to tax-related charges and restructuring costs.

The bank said it was starting 2018 with confidence “in an economic and financial environment that should gradually be more favorable.”

SocGen’s shares rose 4.6 percent in early trading.

“French retail revenues better than guidance and good numbers in markets with equity derivatives back to normal,” analysts at investment bank Jefferies said in a note. Jefferies kept its “buy” rating on SocGen shares.

SocGen’s chief executive Frederic Oudea is aiming to put the lender, whose valuation has been penalized by litigation risks, on a more stable footing with a cost-cutting drive across its retail and investment bank activities.

Oudea is also targeting investments in digital technologies to keep up with changing customers’ behavior.

The bank’s fourth-quarter net income at France’s third-biggest bank fell to 69 million euros ($84.7 million) from 390 million a year earlier, but it exceeded market expectations for a 303 million loss, according to a Reuters poll of 6 analysts.

Fourth-quarter revenue rose at one out of its three businesses - international retail banking and financial services, where business in Russia is recovering following the economic uncertainty linked to sanctions imposed on it over the Ukraine conflict.

Revenue fell 5 percent at SocGen’s investment banking arm, but its performance was a relatively bright spot when compared to European and U.S. rivals.

Its fixed income, currencies and commodities (FICC) trading revenue fell 6.5 percent, versus a 27.4 percent decline at BNP Paribas (BNPP.PA) and a 31 percent drop on average at the big five U.S. banks in the fourth quarter.

“The decline in volatility which began early in the year continued, leading to reduced investor activity. In this environment, structured products remained dynamic,” the bank said in a statement.

FILE PHOTO: The logo of the French bank Societe Generale is seen in front of the bank's headquarters building at La Defense business and financial district in Courbevoie near Paris, France, April 21, 2016. REUTERS/Gonzalo Fuentes/File Photo

Earlier this week, SocGen’s French rival BNP Paribas reported quarterly net profit that fell short of market forecasts although BNP Paribas slightly increased its 2020 profitability target.

SocGen, which derives a third of its revenue from French retail banking, said that this business was still feeling the pinch from low interest rates and renegotiations of loans that were impacting margins. Revenue at this business declined 4.3 percent.

But SocGen said its target for 2018 was to stabilize revenue in French retail, while making progress on its restructuring plan that envisages 1.1 billion euros in savings over the next three years.

Reporting by Maya Nikolaeva and Mattthieu Protard. Editing by Sudip Kar-Gupta and Jane Merriman

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