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SocGen’s turnaround job gets harder

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The Société Générale logo is seen in Courbevoie near Paris, France, April 21, 2016. REUTERS/Gonzalo Fuentes

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MILAN, Nov 4 (Reuters Breakingviews) - Société Générale’s (SOGN.PA) next overhaul will be tougher. The French bank nearly doubled net profit to 1.6 billion euros in the third quarter, beating expectations read more . Buoyant markets and a vibrant economy helped boss Frédéric Oudéa hit key targets ahead of time. Return on normative equity, a measure of adjusted profitability, stood at 12% at the Global Banking and Investor Solutions division. That’s comfortably above the 10% target Oudéa set for 2023 when he announced an overhaul of the volatile division in May. Overall, SocGen’s adjusted return on tangible equity stood at a healthy 11%.

Such a vigorous performance is yet to reflect in SocGen’s valuation. The 25 billion euro bank’s shares trade at around 0.4 times their tangible book value, less than half where they should in theory be, based on current returns. Some scepticism is warranted. Markets have probably peaked. Annual revenue growth will be just 0.5% in the next two years, according to Refinitiv estimates. Lending risks will also increase. The next phase of Oudéa’s makeover will be harder. (By Lisa Jucca)

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Editing by Ed Cropley and Oliver Taslic

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