SG reports solid results, structured product sales remain stable

Société Générale (SG) Group posted revenues of €6.7 billion (US$7.3 billion) for Q1 2023 – down 3.8% year-on-year (YoY).

Revenues for the global markets business, which houses the group’s structured products business, reached €1.7 billion – a 3.2% decrease versus Q1 2022 – despite ‘robust commercial activity, particularly in the rates activities and financing businesses’.

It was once again excellent quarter, with total revenues exceeding €1.7 billion, a level comparable to the record Q1 last year - Claire Dumas, CFO

Against a backdrop of spiking volatility in interest rates and currencies, the fixed income and currencies (FIC) unit had its best quarter since Q1 2012, posting revenues of €890m, up 16% YoY.

The equities business recorded an overall positive performance, posting Q1 2023 revenues of €831m – down 17.7% against a record Q1 2022, but up 28.8% compared to Q4 2022. Market conditions were less favourable due to lower volumes and weaker volatility.

‘It was once again excellent quarter, with total revenues exceeding €1.7 billion, a level comparable to the record Q1 last year […] this further demonstrates the soundness of our cost and risk management, the strength of our franchises and our ability to navigate different environments,’ said Claire Dumas (pictured), chief financial officer, speaking during the presentation of the results on 12 May.

The bank issued 1,375 structured products worth an estimated US$3.5 billion in Q1 2023, a slight increase in issuance and sales from the prior year quarter (Q1 2022: US$3.4 billion from 1,363 products).

Products were publicly distributed in 12 different jurisdictions of which Switzerland saw the highest issuance (842 products) followed by Taiwan (248), France (116), Germany (75) and Italy (57).

One of the best-selling products in the quarter was the Fixed to Floating CMS Linked Coupon Note 2029, which collected €179m during its subscription period and was distributed in Belgium via the branch networks of Crelan and AXA Bank. It pays a fixed coupon of 4.5% pa during the first three-years of investment, while the annual coupon for the remaining years is equal to two times the difference between the 30-year and five-year EUR constant maturity swap (CMS) rate.

Another product that sold well in Q1 was Itineraires Septembre 2022 (€170m), an eight-year autocall linked to the Euronext World Sustainability and Climate Screened Decrement 50 Point Index, which was marketed in France via MMA.

SG was the number one provider of listed products (by issuance) in Q1 2023, ahead of J.P. Morgan and BNP Paribas, according to SRP data. The bank issued some 150,601 turbo certificates in the quarter (Q1 2022: 147,706 turbos). Most turbos were listed in Germany (137,698) while other countries where its turbos were marketed include France (8,134), Belgium (3,301) and the Netherlands (3,193).

In Hong Kong SAR it issued 1,165 leverage products, including 1,024 callable bull bear contracts (CBBCs) and 141 warrants.

The 2023 long-term funding programme, which comprises €25 billion structured notes and €24 billion vanilla debt (well-balanced across formats), is already well advanced, with 70% of the vanilla programme completed.

As of 26 April 2023, €27.6 billion has been raised under the 2023 funding programme, of which approximately €9.6 billion worth of structured notes and €18 billion of vanilla debt, including €7.1 billion of pre-funding raised in 2022.

Funding conditions in Q1 2023 stood at MS +88bp (including structured notes, excluding subordinated debt) and the average maturity was 5.2-years. An additional €1.25 billion was issued by SG subsidiaries.

There was active diversification of the investor base across different currencies (EUR, USD, AUD, CHF, NOK, CNY), maturities and types.

End-March 2023, the group’s consolidated balance sheet included €137.5 billion worth of debt securities issued (31 Dec 2022: €133.2 billion) and an outstanding for hedging derivatives of €43.2 billion (€46.2 billion).

Offshore exposure to Russia was reduced by around €0.2 billion in the first quarter to €1.6 billion on 31 March 2023, i.e. a decrease of 50% since 31 December 2021. The risk exposure on this portfolio is now estimated to be less than €0.5 billion, compared with less than €0.6 billion for the previous quarter. Total provisions stood at €0.4 billion at end-March 2023.

During the quarter an acquisition agreement was signed with AllianceBernstein, an asset management firm providing investment management and research services worldwide to institutional, high-net-worth and retail investors.

Click the link to read the full Société Générale first quarter 2023 results and presentation.