EuroBusinessMedia (EBM): Société Générale, one of the largest European financial services groups, publishes results for the second quarter of 2016. Frédéric Oudéa, hello. You are the CEO of Société Générale and you published solid results in Q2 despite a most difficult environment. What are the main highlights of the second quarter?
Frédéric Oudéa: Effectively our results for the second quarter and the first half are very robust in a difficult environment, as you mentioned. We benefit from strong commercial dynamism across the board, for all our businesses and also in the second quarter from the benefit of the sale – the capital gain - from the sale of our share in Visa Europe. When I look at the businesses, as I’ve said, strong commercial momentum for all our retail activities, in France as well as International Retail. And also in the Global Banking & Investment Solutions, good activity despite the turbulent environment at the end of the quarter, because of the vote of the Brexit. In terms of costs, strong monitoring of the cost, slight increase in the second quarter, more or less stable in the first half. And we also benefited from the further decrease of the cost of risk, which is the result of a good credit origination and the quality of our balance sheet. All in all, we have effectively an increase of our net earnings per share by 25% in the first half. Eventually, regarding the capital ratio, we have also a progress. The core Tier 1 was 10.9% at the end of 2015, 11.1% at the end of June 2016, you see there progress in line with our strategy to build further additional buffers in our capital ratios.
EBM: International Retail Banking and Financial Services are particularly positive this quarter. How do you explain that performance?
Frédéric Oudéa: This is certainly one of the main highlights of these second quarter results. It is the result of hard work in the last few years to improve the performance of the businesses, develop synergies, improve the credit origination. As you said, we have very strong results. First of all, the confirmation of the growth potential. Revenues are going up more than 4%. This is a very good performance in retail activities compared with any Euro Zone retail activities. And there is more to be done. Secondly, costs are increasing because we invest, but at a lower pace than the revenues, hence gross operating income is significantly up and the cost of risk is going down, also in this business at a low level. We benefit generally speaking from the good dynamism of our franchises. It’s true for retail activities, I’m thinking in Romania, where there is again a positive contribution, Russia, where we have good activities with Corporates and the losses are being reduced, quarter after quarter, as expected. And all the financial services are benefitting from good dynamism and positive changes in the markets. So, all in all, this pillar confirms its growth potential. It’s a differentiating factor for Société Générale and the profitability is now at a good level – 16% on normative equity for the second quarter and when I look at the first half, the International Retail Division delivers the same contribution to the net profit of the group and the same profitability on capital than the French Retail.
EBM: How does Retail Banking in France manage to resist so well despite a low rate environment such as the one we are experiencing right now?
Frédéric Oudéa:.France Retail is in the Euro Zone where we have negative rates. The only part where we have effectively this negative impact – not for all the revenues – but for the net interest margin. We have again enjoyed this quarter as well as in the previous quarters, strong commercial activity, because we have – I think – the right business models. In particular regarding the services to corporates, SMEs as well as Private Banking and we benefit from these new business model where we offer services which are beneficial for the corporates. We have been able to enter into a relationship with 1,500 new corporate clients, just in the second quarter. We have also benefitted, for the Retail, from the dynamism for example of Boursorama. All our three franchises: Crédit du Nord, Société Générale, Boursorama, are developing their franchise. Secondly, it means that in terms of revenues, fees are more dynamic and we benefitted from an increase in fees in the first half, that limits the erosion of the revenues coming from the net interest margin, which of course suffers from the negative interest rates despite the growth of loans, which is + 3.5%. So we limit the negative impact of negative rates and I think we do better than our peers. Then we work on the costs, we transform and we benefit also from the decrease of the cost of risk. All in all, the net profit coming from France Retail is increasing by 4% in the first half of 2016 versus last year, despite these headwinds.
EBM: How was Société Générale impacted by the difficult market environment which characterised the second quarter?
Frédéric Oudéa: Obviously, in the second quarter, with all the uncertainty around the Brexit and of course the turbulences at the end of the quarter after the vote, priority was on the strong monitoring of the risk. We are showing again the resilience of this third pillar of Société Générale’s business model. We did not suffer from the negative impact. There was, of course, less activity from Corporates, in the anticipation of the vote, less activity of investors, but overall, the net profit of this division remains at a good level and the profitability on capital remains above 10%, which is one of the best levels compared with our European peers. So, all in all, good monitoring of the turbulences, strong monitoring of the cost and positive about the developments which are also taking place in this pillar.
EBM: And finally, looking ahead to the immediate future what are your priorities for the second half of the year?
Frédéric Oudéa:.I would say to carry on with our strategy. Taking advantage of a business model again which is less exposed to this negative rate environment than many of our peers. So regarding France Retail, now developing our transformation plan, one of the successes of the first half was the capacity to explain to our staff, to all our trade unions, what we aim to do in the next five years. Now it’s about implementation, but we are ready to implement; and of course maintain the strong commercial momentum with all our clients. Secondly, for International Retail, further confirm that potential for growth and the improvement of profitability. And I think that this quarter again shows what we can achieve in this division. And third, with GBIS (Global Banking & Investor Solutions), monitor again in particular the transformation and the cost element to further improve the profitability in the second half, which might remain again a bit uncertain with still many political elections and so we want again to ensure the sustainability of the contribution of GBIS (Global Banking & Investor Solutions). As you can see in a nutshell, transformation across the board, for the benefit of our clients, our shareholders and our staff.
EBM: Frédéric Oudéa CEO of Société Générale, thank you very much.
Frédéric Oudéa: You’re welcome.
