Societe Generale Earnings: Aggressive Outlook, but Performance Still Disappoints

No-moat Societe Generale reported a 22% lower group net income for first-quarter 2024 compared with the respective period of 2023. In addition, a significant increase in the cost of risk amounted to EUR 400 million or 27 basis points, which is in line with the group’s guidance for 2024. However, this amount is slightly higher than the average cost of risk in 2022-23. The cost/income ratio of 75% appeared to be slightly lower than in the previous quarter. Operating costs were hit by transformational charges, which should result in a lower efficiency ratio of 71% for 2024 as guided by an ambitious 60% in 2026, which we do not see as feasible yet. Societe Generale needs to report higher efficiencies to prove it can reach these goals. An additional contribution to decreased net income came from a EUR 84 million loss after the disposal of Societe Generale’s Moroccan business, which was announced earlier in first-quarter 2024. We keep our fair value estimate of EUR 29.30/share, which we updated recently.