Societe Generale (SocGen) reported a net loss of about 1.26 billion euros ($1.48 billion) for Q2 2020 after missing market expectations as it set aside more capital to mitigate COVID-19-related negative impacts on its business. GLE stock is down.
Societe Generale SA (EPA: GLE) reported a net loss of about 1.26 billion euros ($1.48 billion) for Q2 2020. The bank missed market expectations as it set aside more capital in the wake of the coronavirus pandemic and reduced its trading business value.
GLE stock is down 2.99%, trading at 12.60 EUR.
The Societe Generale CEO, Frédéric Oudéa, told CNBC’s “Squawk Box Europe” on August 3 that Q2 had effectively been its worst on record due to the health crisis. He explained:
“We see the impact of the crisis on our businesses, with the lockdowns of the economies. What I would like to highlight is that we saw a rebound in June or mid-May, starting in mid-May depending on geographies for all our activities. Now we are ready to rebound with the economies.”
The French bank made provisions of around 653 million Euros to mitigate probable risks arising from the current health crisis. What it refers to as its ‘cost of risk’ is now almost four times higher than where it was at the same time in 2019.
Societe Generale Q2 Revenue
This net income surprised traders with a huge loss. Initially, analysts expected a loss of 13.6 million for the quarter based on the data acquired from Refinitiv. Shares tanked by almost 4% in early deals on August 3. SocGen had recorded a loss of almost 326 million euros in Q1 2020 and its stock is low by about 58% since the start of this year.
The expenses of the quarter dropped to 3.9 billion euros from 4.3 billion euros in 2019 while revenues stood at about 5.3 billion euros, vs.versus 6.3. billion a year ago. CET 1 ratio (bank solvency) rose 12.5% from 12% a year ago.
Societe Generale confirmed that it will reduce costs in its Global Banking and Investor Solutions endeavors; by almost 450 million euros by 2021-2023. The investment arm of the bank that has been performing strongly in its equity business struggled in the second quarter.
Revenues at its equity trading unit recorded a plunge of approximately 80% from 2019. However, fixed income rose by almost 38%. In that connection, the banking giant said that it will mitigate the risk profile of its credit and equity products. That strategy might impact revenues by around 200 million to 250 million euros.
The French lender confirmed that its CET1 ratio is expected to range between 11.5% and 12%; by the end of this year. This ratio sheds some light on the bank’s capital strength.
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