(News Bulletin 247) – The two French banks have published their fourth quarter results. The mutual bank is suffering from lower-than-expected revenues coupled with higher costs while Société Générale is reassuring about its profits.

A certain apprehension awaited the results of Crédit Agricole SA and Société Générale, because BNP Paribas had been harshly sanctioned by the market last week, weighed down by a fourth quarter below expectations.

For the moment, the accounts of the two French banks are not delighting the market. The copy of Crédit Agricole SA (CASA), the listed structure of the Crédit Agricole group, even freezes investors, despite a record profit of 6.35 billion euros over the whole of 2023, up almost 20% .

The share thus fell by 6% around 12 p.m., showing the biggest drop in the CAC 40, which therefore recalls the treatment that the market had reserved for the results of BNP Paribas.

In the fourth quarter, CASA’s net profit was 1.334 billion euros, above the consensus figure of 1.284 billion euros.

The reasons for investor discontent lie in other areas. “Revenues are a little lower than expected while costs are higher than expected, which gives an operating result that is less good than expected,” summarizes a financial intermediary.

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Insurance weighed down by climate losses

The underlying net banking income, equivalent to turnover, stood at 6.03 billion euros, which is 2% lower than the consensus, notes Morgan Stanley. At the same time, the underlying operating expenses turned out to be 4% higher than expected, continues the American bank, with an amount of 3.71 billion euros against a consensus of 3.56 billion euros. These charges notably included non-recurring effects of approximately 187 million euros.

This results in an underlying gross operating profit of 2.307 billion euros, 12% lower than the consensus of 2.61 billion euros.

In detail, UBS notes that with the exception of corporate and investment banking, all CASA divisions disappointed in their gross operating results. Community banking and insurance in Italy were “particularly weak”, adds the Swiss establishment.

Royal Bank of Canada, for its part, highlights the fairly clear failure of Crédit Agricole Assurances, whose underlying gross operating profit is 21.5% lower than expected. This division was penalized by two exceptional elements, namely “a high climate-related loss experience”, which weighed down its revenues by 262 million euros, and a negative impact of 205 million euros linked to the IFRS 17 accounting standard. .

The local bank in France, with the LCL brand, generated an underlying gross operating profit 11.6% lower than the consensus, which stood at 338 million euros, also notes Royal Bank of Canada.

In terms of solvency, the non-phased CET 1 ratio (i.e. equity compared to risk-weighted outstanding assets) stood at 11.7%, in line with expectations.

Positive point: Crédit Agricole SA announced that it would propose a dividend of 1.05 euros per share, up 24% over one year and above all higher than analysts’ forecasts, which stood at 87 cents, according to Morgan Stanley.

Better than expected profit at Société Générale

Societe Generale is doing better. The La Défense bank gained 0.1% around 12 p.m. after even moving clearly in the green at the start of the morning.

The group led by Slawomir Krupa suffers from a significant discount on the stock market compared to its European competitors and even its French counterparts. Ahead of the publication of its results, “there were concerns about its profit, after the publication of BNP, but it is ultimately better than expected”, explains the financial intermediary previously cited.

Societe Generale’s gross operating income stood at 1.29 billion euros in the fourth quarter and its operating profit reached 930 million euros, two figures which are respectively higher by 4% and 13% to consensus expectations, according to Morgan Stanley.

Net banking income, of almost 6 billion euros, exceeded expectations by almost 2% while costs – that is to say management fees – were slightly higher, by 1%, than consensus. .

As for the net profit of 430 million euros, it quite clearly exceeds the consensus of 357 million euros.

At the divisional level, UBS emphasizes that the “retail banking, in France, private banking and insurance” division particularly surprised positively, with a gross operating profit, certainly down 40.6% over one year to 281 million euros, but far above expectations (181 billion euros).

“This is important because it is due to stronger net interest income while this division must be the engine of the group’s profit growth until 2026,” notes the Swiss bank.

The CET 1 ratio stood at 13.1%, better than the 12.9% consensus, notes Morgan Stanley.

Share buybacks above expectations for SocGen

The distribution to shareholders is also higher than expected with a dividend of 90 cents and a share buyback program of 280 million euros, when the consensus was counting on a dividend of 87 cents and share buybacks of 184 million. euros, again according to Morgan Stanley.

Negative point however, the growth objective turns out to be prudent: for 2024, Société Générale anticipates an increase in its revenues greater than or equal to 5% when analysts on average expected an increase of 7%, according to Bank of America , while the operating ratio, that is to say the charges compared to net banking income, is expected to be less than 71%, compared to a consensus of 67% according to Morgan Stanley.

“The fourth quarter results are generally disordered, due to multiple exceptional items. However, we believe that this quarter should mark a trough in the bank’s profitability,” estimates Bank of America.

The establishment explains in particular that the negative impact of the hedges that Société Générale had taken to protect itself against potential drops in rates on its net interest margin in retail banking (while rates have on the contrary increased) should be fade in the future.

“The objectives for 2024 confirm the recovery in profitability, even if they are a little below consensus,” adds Bank of America.