Société Générale Q3 trading falls, Commerzbank integration continues

Société Générale has reported a net banking income of €5.9 billion for Q32019, a 8.4% decrease from the same quarter last year, while in terms of businesses, revenues were 2.9% lower than in Q3 2018.

According to SRP data, Société Générale launched 52,397 structured products in the third quarter of 2019, making it the second most active issuer in the period behind Commerzbank – the bank whose equity markets & commodities (EMC) business it acquired in November 2018.

The third quarter saw the continued integration of the EMC business, which comprises manufacturing and market making flown and structured products as well as part of asset management’s activities, while global banking & investor solutions continued with the implementation of its plan for the adaptation of its operational set-up.

The target of reducing risk-weighted assets (RWA) by €10 billion by 2020 (including €8 billion in global markets) was already achieved in Q3 2019. Overall, global banking & investor solutions’ RWA declined by €20 billion in the first nine months of the year.

Funding conditions were competitive and the average maturity was 4.5 years. At end-September 2019, the group had achieved 100% of its long-term financing programme scheduled for 2019 and the annual structured notes issuance volume of approximately €19 billion is in line with amounts issued over the past years. As of October 23 2019, €17.4 billion worth of structured notes has been issued by the bank.

The vast majority of products issued in Q3 2019 were flow and leverage certificates listed in Germany. In France, the bank sold 183 products, predominately wrapped as life-insurance contracts and worth approximately €1 billion, which were distributed via 30 different providers, including AG2R La Mondiale, Ageas Patrimoine, Capitis Conseil, DS Investment Solutions, Irbis Finance, La Financiere du Palais and Swiss Life Banque Privée.

The bank’s best-selling structure in France was SCI Equitim 2027, an eight-year MTN linked to a managed fund that sold €24m during its subscription period.

Other European markets where the bank was active were Italy (€44m from nine products), Belgium (€22m from two products), Ireland (€9.5m from six products), and the UK (€17m from 11 products).

Outside Europe, it was the manufacturer behind 261 products in Taiwan (US$870m) targeted at private banking investors. In Japan, the bank issued 15 products (US$63m) which were distributed via local securities firms while in China two wealth management schemes were introduced to the market.

In a challenging market environment – the third quarter was impacted by the full effect of revenue attrition following the scaling back and discontinuation of the OTC commodities business and the proprietary trading subsidiary – global markets & investor services’ revenues, at €1.2 billion, were down -9.2% compared to the prior year quarter.

Equities and prime services revenues were down -20.1% versus 3Q2018, at €505m, against a backdrop of lower volumes and adverse market conditions, particularly in August.

At €520m, the revenues of fixed income, currencies & commodities were one percent higher in 3Q2019 than in 3Q2018. Rate and credit activities, as well as financing activities posted good results in the third quarter, offsetting the impact on revenues of the restructuring in global markets.

The group’s consolidated balance sheet included debt securities issued of €129.9 billion and an outstanding for hedging derivatives of €11.9 billion, as of September 30, 2019.

‘Once again this quarter, we have achieved results very much in line with our objectives and priorities,’ Fréderic Oudéa (pictured), chief executive officer, commented. ‘Global banking & investor solutions delivered resilient net income in an unfavourable environment, without yet benefiting from the positive effects of the ongoing restructuring which is ahead of its 2020 objectives.’

Click the link to view the third quarter and nine months 2019 results and the presentation.