EuroBusinessMedia (EBM): Societe Generale, one of the Europe’s largest financial services groups, reports its 2018 full-year results. Frédéric Oudéa, hello and welcome.
Frédéric Oudéa: Hello.
EBM: You are the CEO of Societe Generale, how did Societe Generale perform in 2018 and what’s the latest on the execution of your strategic plan?
Frédéric Oudéa: First of all, if we look at the results themselves, I think we have posted robust results. First of all, growth of net banking income in a difficult overall environment; good monitoring of the costs, in line with our expectations; low cost of risk reflecting the quality of our assets, all in all a net profit of €3.8 billion and an underlying profitability of 9.7%. So, something robust, as I’ve said, in this environment.
When we look at the different businesses and effectively also at the first year of implementation of our strategic roadmap over the next three years, what is positive is that most of our group initiatives have delivered, in particular in the retail activities, whether they are in France or even more internationally, and in Financial Services. And when I look at the Wholesale Banking activities, we have had very good results in all the Financing and Advisory activities.
It is fair to say that regarding the capital markets, the results are more disappointing and below our expectations, in particular because of a fourth quarter which was very difficult, with very difficult market conditions.
Beyond the trajectory of each business in terms of NBI, where I also see positive results in the delivery is regarding the cost, we are in line with our cost efficiency plan. The cost of risk is low, reflecting again the good quality of our assets and fundamentally we have also delivered largely in our disposal programme. All in all, I think it’s a positive first step.
Now, at the same time, it’s also fair to say that the environment has changed, compared with the way we were looking at the world 15 months ago. First of all, the prospects for growth are lower. It started mid-2018 with question marks on China growth, with trade war worries, then it also disseminated in the Euro zone for example. Second, the geopolitical uncertainties are much higher today overall than just 15 months ago. And also, very importantly, when I look at the regulatory framework, we have the confirmation that in Europe, there will be further constraints going forward in the coming years, both in terms for example of capital requirements but also with regulations such as MiFID II. So we have to factor this environment, this change in the environment, structural environment, in our future plan and take that into account.
EBM: Can you tell us how the execution of your plan is adapting to this deteriorated environment and what actions are you planning to achieve it?
Frédéric Oudéa: First of all, this change of environment does not change our ambition to build in the long term a strong European banking group, a diversified banking group which is committed to accompanying its clients in their positive transformations and more generally our economies and being able to deliver a sustainable and responsible growth, with of course a sustainable profitability. So this goal has not changed, this ambition has not changed.
Now, if I look at the shorter term and look at each business, there is no reason to change what we are doing in the French Retail : pursue this formidable transformation with digital technology, adjusting all our set-up in terms of distribution networks and being committed to help our staff in the new jobs, in the new functions. We of course factor the lower interest environment in our financial revenue perspective for the next two years, the short-term.
Regarding International Retail and Financial Services, as I’ve said in commenting on the results, here it’s just a bright spot and we need to further take advantage of our leading franchises, putting capital to work, taking advantage of our positioning to conquer more clients and of course innovating at the same time, also for example with new technology.
Regarding Wholesale Banking, we want to pursue the development of our financing activities which are geared towards our corporate clients, accompanying these clients in all their international projects, in financing also infrastructure etc. which are growing areas and it’s fair to say we are adjusting in our capital markets, strategically, to take into account this environment going forward. We are going to refine the capital allocation, focusing this allocation towards our areas of excellence, such as the distribution of structured products, such as our Prime Brokerage activities, such as our ETF activities and then refocus areas where we make less money or areas such as Fixed Income and Currency where there is less profitability today. Second, we want to have more efficiency from all our resources and effectively by upgrading this efficiency, breaking further silos, focusing on the similar client base, we want effectively to be able to save something like €500 million of cost in the Global Banking and Investor Solutions division to improve the profitability. So this is the area where effectively we are adjusting the strategic roadmap for the next two years.
Beyond what each business will deliver, we are also comforting our capital trajectory. It’s very important to be very solid. We maintain the same Core Tier One ratio target, but we give even more margin of manoeuvre for the next two years to reach this target, in particular by enhancing the target of our disposal programme.
All in all, what I would like to say is my confidence in our capacity to deliver this first step of a long-term transformation, strategic transformation in a very different environment with different client needs, I’m very confident that the next years will be a step towards an even more robust and even more impactful business model and of course with a strengthening of our structural profitability.
EBM: Frédéric Oudéa, CEO of Societe Generale, thank you very much for your time.
Frédéric Oudéa: You’re welcome.
