Societe Generale

Societe Generale reported its 1Q2013 results last week, which were quite resilient to the challenging economic environment in Europe.

Key 1Q13 results included:

• Net banking income was down 19.4% to €5.1bn in 1Q13 compared to €6.3bn in 1Q12
• Group net income was substantially lower (27.4%) in 1Q13 at €852m relative to €1,173m in 1Q12 mainly due to the revaluation of the Group’s own financial liabilities
• Provisions for loan impairment (or the cost of risk) amounted to 75bps in 1Q13 versus 84bps in 1Q12. This trend was lower for both International Retail Banking and Specialised Financial Services. It was stable in the French Networks and remained at a low level in Corporate and Investment Banking
• The Group reported its fully loaded Basel 3 Common Equity Tier 1 ratio for the first time at 8.7%.The Basel 2.5 ratio of 10.6% was slightly lower than 1Q12 mainly due to new treatment of insurance subsidiaries having a 69bps negative impact on the Core Tier 1 ratio in 1Q13. The fully loaded ratio is expected to be improved to 9.5% by the end of 2013 mainly through retained earnings
• On a divisional level, French Networks net banking income revenue was slightly lower than in 1Q13 (-1.4%) with the total contribution to Group net income down 21.5% in 1Q13 to €256m, compared with €326m in 1Q12. This was mainly due to a decline in service and financial commissions. SG Russia contribution of €39m helped strengthen the International Retail Banking net income contribution to the Group which was 75.6% higher in 1Q13 than in 1Q12. Specialised Financial Services and Insurance performance was 17.8% up versus 1Q12 due to strong 1Q13 insurance results. High volume activities in Asia increased Corporate and Investment Banking contribution to the Group’s revenue by 40.6% compared to 1Q12. Despite the finalised positive disposal of the US fund manager TWC as part of deleveraging programme, Private Banking, Global Investment Management and Services contribution to Group net income of €73m was 9.9% lower than in 1Q12. The net result for the Corporate Centre was a loss of €730m in 1Q13 compared to a loss of €234m in 1Q12. Negative impact of the revaluation of the Group’s own financial liabilities was -€1,045m in 1Q13 versus -€181m in 1Q12 and wiped out the gain related to the disposal of NSGB which amounted to €377m after tax. Overall, Core Businesses are profitable, however the Corporate Centre incurred a significant loss this quarter of -€730m versus -€234m in 1Q12, leading to a negative 50.3% impact on Group’s performance which was down from €732m in 1Q12 to €364m in 1Q13.
• Please refer to Table 1 for more details:

Table 1

BNP Paribas

BNP Paribas 1Q13 results showed slow but steady growth due to good control of costs and risks resulting in net income of €1.6bn, a 1.7% increase compared to the 1Q12.Two exceptional items had a positive impact of a net total €149m: €-215m in credit adjustments and €364m result of the first time adoption of Debt Value Adjustment (DVA) under IFRS 13.

Key 1Q12 results included:

• Gross operating income was up 16.4% to €3.5bn compared to €3.0bn 1Q12). It was down, however, 5.3% for the operating divisions
• The Group’s cost of risk increased by 3.5% to €968m compared to 1Q12
• BNP is relatively well-placed in comparison to its peers in terms of capitalisation, with a Basel 2.5 Core Tier 1 ratio of 11.7% at 1Q13 and a Common Equity Tier 1 ratio of 10.0% on a fully-loaded Basel 3 basis
• On a divisional basis, although Retail Banking revenue was 0.3% down to €6.1bn versus 1Q12, Europe-Mediterranean and BNL Banca Commerciale businesses performed well, up 15.9% and 0.8% respectively, due to significant deposit growth. French Retail Banking and Belgian Retail Banking experienced lower loan volumes on the back of persistently low interest rates which lead to slightly lower revenues, down 2.0% to €1,776m and 0.3 % to €838m respectively. Despite a small decrease of 3.1% in BancWest performance, its deposits and loans grew by 4.4% and 3.9% respectively. Personal Finance business was just 0.2% lower than in 1Q12. Investment Solutions grew this quarter by 2.8% to €1,563m compared to €1,521m in 1Q12. The rise was due primarily to very good inflows at Wealth Management in domestic markets and especially in Asia. Despite the high unit revenue growth in Asia, Corporate and Investment Banking business was down 21.1% on 1Q12 to €2,461m
• Operating expenses totalled €273m compared to €180m in 1Q12
• Please refer to Table 2 for more details:

Table 2

FIIG has the following Societe Generale and BNP Paribas DirectBonds available:

Table 3

All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities