(News Bulletin 247) – The stock was moving sharply higher until the conference call with analysts during which the absence of clear indications on certain parameters seems to have pushed the market to change its mind on the stock.

This CAC 40 results season is definitely marked by significant movements during the session. The semiconductor specialist STMicroelectronics suddenly turned upward after its management held a reassuring conference call following the publication of results that were below expectations.

On Tuesday, Stellantis for its part fell on the stock market in the afternoon after its financial director warned that the car manufacturer expected a sharp drop in its current operating margin in the first half, while making uncompromising comments on the market. European.

This Friday it is the turn of the Société Générale bank on the stock market to experience a violent and impressive turnaround.

After the publication, this Friday morning, of its quarterly results, the action of the La Défense bank jumped, gaining up to 6% and moving very sharply upward during most of the morning. But around 11:40 a.m., the stock experienced a bout of weakness before collapsing. Around 1:45 p.m. the stock fell 6.1%, showing by far the biggest drop in the CAC 40.

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Retail banking and the CET 1 ratio as the cause?

How to explain such a movement? Reuters noted that the fall in the stock occurred following comments from financial director Claire Dumas on the net interest margin (in short, the money released on loans, via the difference between interest received and those paid on deposits) in France.

“The market was a little concerned about the net interest margin forecast which was honest but bullish before. I think that’s probably what caused the weakness,” Johann Scholtz, an analyst, told Reuters. at Morningstar.

Responding to a question from a Goldman Sachs analyst, Claire Dumas indicated that at the end of the first quarter and due to the dynamic on deposits, the trajectory of this net interest margin in France was “within the bottom of the range” of its annual projection scenario. Societe Generale had indicated that it was aiming for a net interest margin in retail banking in France higher than that of 2022 (4.1 billion euros) for 2024.

“The stock’s reversal was triggered by the management call. The lack of clarity regarding sensitive issues for the stock, such as potential regulatory impacts on the CET1 ratio (following possible on-site inspections) and the persistent problems concerning net interest income in France, is frustrating”, explains Thomas Hallett, analyst at KBW, to News Bulletin 247.

Hedge funds responsible for the decline?

The CET 1 ratio is a solvency ratio which relates equity to risk-weighted outstanding assets, which ensures that a bank is sufficiently capitalized with respect to its risks. This is a closely followed indicator of the market, and investors are particularly scrutinizing Société Générale because its ratio will be penalized in the coming months by several unfavorable impacts, linked in particular to the new prudential standards of Basel IV (in 2025).

“Societe Generale’s investor base is oriented towards ‘hedge funds’, which can tend to create additional volatility in the share price around earnings,” also explains Thomas Hallett.

Let us recall that strictly speaking, Société Générale’s results turned out to be higher than expectations in the first quarter, driven in particular by the corporate and investment bank.

The La Défense bank notably published a net profit in the first quarter of 680 million euros, exceeding the consensus which stood at 475 million euros, according to Royal Bank of Canada.