by Mathieu Rosemain

LONDON (Reuters) – The general director of Société Générale, Slawomir Krupa, presents his strategic plan for the next three years in London on Monday, a highly anticipated test for the new boss of the red and black bank which is currently failing to convince investors.

After the presentation early Monday of the financial objectives for 2026, Société Générale shares fell 9.25% to 24.03 euros at 9:53 GMT on the Paris Stock Exchange, its biggest drop in session since March.

Slawomir Krupa, who took the reins of Société Générale last May following the 15-year mandate of Frédéric Oudéa, declared on Monday his ambition to make the group a “robust and sustainable leading bank” while Société Générale remained in recent years lagging behind its great rival BNP Paribas and several other of its European competitors.

The third French bank by market capitalization is targeting a return on tangible equity ratio (ROTE) of 9% to 10% in 2026, compared to 5.6% declared at the end of June, thanks to the improvement in its profitability and the reduction of its costs.

It also provides for a distribution rate of between 40% and 50% of net income declared to shareholders in the form of dividends and buybacks from 2023.

These two targets are slightly lower than previous commitments, which called for ROTE to reach around 10% in 2025 and a payout ratio of 50%.

Societe Generale is also targeting a CET1 capital ratio – a key measure of financial strength – of 13% in 2026, almost at the same level as the 13.1% declared at the end of June, taking into account the requirements of increased solvency under the Basel IV rules which are due to come into force at the start of 2025.

“DISAPPOINTING” OBJECTIVES

The new targets are based on forecasts of annual revenue growth between 0% and 2% on average over the period 2022-2026.

“We are negatively surprised by the absence of revenue growth, the increase in the capital objective, the drop in the distribution rate and ROTE and by the absence of details,” the analysts underlined in a note from Jefferies.

Exane called the targets “disappointing” while analysts at JP Morgan reported lower-than-consensus revenue forecasts while welcoming the focus on costs.

“The new CEO should win the sympathy of investors with concrete results,” they observed.

Asked about the negative market reaction, Slawomir Krupa said he was confident in his strategy.

“We are convinced that this is the right plan for the bank for decades to come,” he told reporters.

He stressed that it was essential for him to be credible and to achieve the objectives set, the bank having often failed to convince the markets on this point.

A SIMPLIFIED BUSINESS MODEL

Slawomir Krupa, who spent most of his career at Société Générale where he most recently headed the investment bank, said on Monday that he would rationalize the bank’s activities, without giving further details.

“We will strengthen the group by shaping a simplified business model. We will take the necessary decisions to strengthen capital and gain flexibility, structurally improve our operational efficiency and maintain our demanding risk management at the best level,” he said, cited in a press release.

“There is no point in operating a myriad of activities with average returns,” he added to journalists, recognizing that the lack of details on possible transfers would constitute a source “of frustration for everyone. world today.

Sources close to the matter told Reuters that the group was open to the idea of ​​selling its subsidiary specializing in sales and capital goods financing SGEF, which it considers non-essential.

Societe Generale announced in June that it had signed agreements for the sale of its subsidiaries in Congo, Equatorial Guinea, Mauritania and Chad, and said it was examining a fifth unit on the continent.

The bank said its new strategy had led it to book write-downs for the remaining part of its African, Mediterranean and overseas operations, as well as its Equipment Finance division, totaling around 340 millions of euros.

From the perspective of ESG objectives, Société Générale has said it wants to reduce its exposure to the oil and gas production sector by 80% by 2030 compared to 2019.

The bank has also set a target of 35% women managers globally by 2026 and has allocated 100 million euros to reduce the pay gap between men and women.

SEE AS ​​WELL:

BOX-The key objectives of SocGen’s new strategic plan

(With the contribution of Tassilo Hummel, Silvia Aloisi, Elisa Martinuzzi, Michal Alexandrowicz; Diana Mandiá, edited by Blandine Hénault)

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