2015 Results - Interview with CEO Frédéric Oudéa en

EuroBusinessMedia (EBM): Société Générale, one of the largest European financial services groups, publishes results for 2015, Frédéric Oudéa, hello. You are CEO of Société Générale. Tell us about last year which unfolded in a very complex environment. What are your main takeaways from 2015?

Frédéric Oudéa: I consider that 2015 is indeed a very good year for the Société Générale Group. First of all, all our businesses enjoyed a strong commercial dynamic. We’ve been able to conquer new clients. That’s very important obviously for the future. And we’ve been able to launch new initiatives, new business models, as well as important transformation programs, in particular for the French retail, taking into account of course the emergence of new digital technologies. Beyond that, that translates into strong financial figures. The net banking income grew by 4% on a like for like basis and a constant exchange rate, close to 9% in a nominal figure. We have been able to monitor costs well. The cost of risk has gone down, it’s at a historically low level. That translates into a high net profit, 4 billion euros, with a strong increase compared with last year. The second satisfaction is that we are one year ahead in terms of the target ratios for capital or leverage ratio; 10.9% of core tier 1, 4% leverage ratio, the balance sheet is very sound, the balance sheet is very strong. And third element, we have complied with our commitment in terms of capital usage. We are dedicating 50% of the net profit to the dividend, which means that we are proposing for our shareholder assembly a 2 euro per share dividend, paid in cash, to be compared with 1.20 paid last year. So all in all as you can see, good momentum, positive transformation that gives us confidence for the future and coming years.

EBM: Retail banking in France has performed well despite historically low interest rates. Why is that?

Frédéric Oudéa: In 2015 we had a historically high number of new clients. The commercial dynamism was extremely strong in our three brands; Société Générale, Crédit du Nord and Boursorama. 305 thousand new clients. That helps to grow the loan book, which grew by 2%, and of course also to growth the commissions and in particular enjoying the benefit of new business models such as our new Private Banking model. So we had good figures, both on the net interest margin as well as commissions. We also enjoyed a low cost of risks -that’s the result of a multi-year effort to originate well our credit. All in all, strong progress of net profit, good profitability.

EBM: How would you say retail banking and international financial services evolved throughout the course of 2015? And also, if you could address the situation in Russia, would you say Russia has continued to normalise?

Frédéric Oudéa: Yes indeed. And altogether we have better results in 2015, in line with our expectations for all our businesses. Across the board, I would say, good commercial activity in Europe, in Africa, in our financial services. We have also a low cost of risk – again lower than last year – which means a strong increase of the net profit of that division. In line with our expectations, where we had to progress, Romania for example, is contributing positively when it was making losses in 2014. And to come to Russia, we expected a loss of between 200 and 300 million euros. We have actually a loss of 165 million euro, so lower than our expectations and just 8 million in the fourth quarter of this year. So that shows effectively, quarter after quarter, a capacity to improve the results. For next year, in a still difficult environment as we all know, we have in mind still a loss, but a loss which will be halved, so something between 50 and 100 million euro. We are able to progressively normalise the contribution of our Russian activities.

EBM: And how would you say Global Banking and Investors Solutions performed given the difficult second semester?

Frédéric Oudéa: I’m happy with the performance. First of all, a growth of revenues. In the markets, slightly higher than our peers as far as we can assess. Again, good monitoring of the risk - we avoided making losses - which means high contribution and good profitability in such circumstances. Going forward, we will pursue the transformation of this business, we have the benefit already in 2015 of new ventures such as the development of our prime services. It’s an area of growth, we intend to further benefit from this development as well as for example, from the financing activities.

EBM: And of course, there is something we need to address: financial markets have been in turmoil since the beginning of the year with the banking sector under particular stress. How concerned do we need to be?

Frédéric Oudéa: I’m not concerned and I think we have something very different from what we experienced in 2008 and there is a kind of disconnect between the nervousness in the market and the reality of the economies, and actually, of the banking sector. In terms of the economic outlook, may I say we have in mind reasonable growth in the Eurozone, around 1.6%; 1.5% for France, supported also in particular by low energy prices, low rates, lower euro, we are also positive in the outlook in the US. All in all I would say something that should remain reasonably good. Regarding the banking sector, we are in a very different situation. There is an excess of liquidity; we do not see the same tension that we saw in 2008 in terms of liquidity. The quality of the portfolios is much better, the levels of the capital ratios are much better. If I just take our banks, we have never had such a strong balance sheet, we have never had such a strong financial performance, we have never had such a low level of non-profitable loans. So I think there is a lot of excess, because there are fears - people might have too many uncertainties -but I think reality is more positive.

EBM: Let’s look at the bigger picture now. Where does Société Générale currently stand with respect to its strategic plan and what are your priorities for 2016?

Frédéric Oudéa: 2016 is the third year of our three-year strategic plan. Clearly we are in a different environment than the one we had in mind in 2014 and secondly, we have also a higher capital ratio to manage, more regulatory demands, so we will manage the group at 11% of core tier 1 instead of 10%. What does that mean? That means overall I’m are very positive about the outlook – commercial and financial outlook – for our group, but in terms of return on equity, if we confirm our capacity to have a 10% return on equity, we will not be able to confirm it as soon as 2016. But we will pursue our transformation. We will in particular try and get the first fruit of the transformation of the French retail, the first important year of transformation. Second, increase further the contribution of our international retail. We can do better than in 2015. And regarding Global Banking and Investment Solution, ensure we monitor well our risk in this turbulent environment while maintaining a resilient contribution and good profitability. All in all, I’m convinced that 2016 can be an additional year of value creation, in line with what we’ve been able to achieve in the last five years. A permanent and regular increase of our net asset per share, net tangible asset per share, and of course we will see the increase of our dividend, we will maintain a 50% pay-out ratio for our dividend in 2016.

EBM: Frédéric Oudéa Chairman and CEO of Société Générale, thank you very much.

Frédéric Oudéa: You’re welcome. Thank you.

Paris, February 11, 2016 — Société Générale, one of the largest European financial services groups, reports 2015 full year results. CEO Frédéric Oudéa comments on the Group’s results.
- Company website: www.societegenerale.com

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