SocGen Earnings: Profitability Boosted by Trading Result, but Net Interest Income Disappoints Again

While no-moat Societe Generale reported significantly improved results for the second quarter of 2024, the lower guidance for its struggling French retail unit was disappointing. Net income grew by 24% year on year and was 60% higher than the depressed first quarter. Like many of its peers, SocGen enjoyed a strong quarter in its investment banking operation, as equity trading revenue benefited from increased volatility. Crucially, SocGen’s cost/income ratio is moving in the right direction, coming in at 68% for the quarter compared with 74% for fiscal 2023. Its target of a below 60% cost/income ratio by 2026 still looks aggressive. SocGen reported a 7% return on tangible equity for the second quarter—SocGen issues guidance of 9%-10% ROTE in 2026, which we have not viewed as feasible. We do, however, note the progress made in the recent quarter. We keep our fair value estimate at EUR 29.30/share.