Analyst Note| Johann Scholtz, CFA |
No-moat Societe Generale had a disastrous start to 2020 when large trading losses on structured equity products decimated its top line and saw it reporting a EUR 326 million net attributable loss for the first quarter of 2020. These losses did not recur in the first quarter of 2021 and this--combined with loan loss provisions coming in 67% lower--resulted in a return to profitability and Societe Generale booking a EUR 814 net profit for the first quarter of 2021. Trading results for Societe Generale are materially the medium-term average results. We do not believe there has been a secular change in the profitability structure of securities trading and that it would be dangerous for investors to merely extrapolate the current bumper trading revenue into the future. We maintain our EUR 21 per share fair value estimate and our no-moat rating.