Société Générale with the help of UBS – 6. 1. 2022 at 10:42

(AOF) – Societe Generale gained 2.30% to 25.56 euros, which was also helped by an increase in UBS’s recommendation from Neutral to Buy. The target price was reduced from EUR 34.70 to EUR 31. The design firm expects a pre-reserve profit of one-third in 2022-24 due to the acquisition of Leaseplan and the significant synergies that have enabled the merger of the retail banking networks in France. The analyst points out that the shares are too cheap to be ignored, as the return on tangible assets in 2029 is expected to reach 9%.

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Key points

– The Bank of 1864, one of Europe’s leading financial services groups;

– EUR 25.8 billion in net banking income generated by retail banking in France – Societe Generale, Crédit du Nord and Boursorama, international retail banking, financial services and insurance, followed by retail banking clients and investor solutions;

– A business model that claims to be at the forefront of positive transformations: a 100% digitized bank, open platforms and architectures, winner of a European competition;

– Capital characterized by the presence of employee shareholders (6.65% and 11.9% of voting rights), with a 16-member board of directors chaired by Lorenzo Bini Smaghi, CEO Frédéric Oudéa;

– Solid balance sheet with equity of 65.1 billion EUR, CET 1 ratio 13.7%, liquidity coverage ratio 129%, indebtedness ratio 4.9%, ie debt rating.

Challenges

– Vision 2025 strategy, based on a merger with Crédit du Nord, local roots, ability to respond, adapt to customer needs and responsibilities:

– Innovation strategy rooted in the group’s DNA, aimed at creating a data-driven bank through artificial intelligence: EUR 200 million in annual value creation through data and AI / 8/10 servers in the cloud (2025 cloud “second generation” targets including 50% in private cloud and 25% in public cloud / new business models -Shine for individual customers, Forge for digital commitments, reezocar for car rental and safe, payment platform and digital currencies;

– Environmental strategy to become a world leader in sustainable financing with 2 axes: integration of criteria in all companies: 100% responsible savings offer, support for customers in their energy transition and structuring hydrogen solutions… / commitment to sustainable transition : 10% reduction in global oil and gas exposure by 2025, full exit from thermal coal by 2030-40 and by 2023 from loans guaranteed by reserves, ie EUR +150 billion in energy transition assets;

– Continued integration of Crédit du Nord, completed in 2023;

– After the reorientation of activities, affordability to reorient to mobility (purchase of LeasePlan by the subsidiary ALD and discussion on the offer of alternative banking services Boursorama to French customers ING).

Challenges

– net assets per share of EUR 68.7 compared to the stock market price;

– Impact of the Russo-Ukrainian War: sale of a stake in Rosbank, which led to a decrease in the CET ratio to around 13.5% and a devaluation of around EUR 2 billion in net income;

– targets for a sharp increase in the cost-benefit ratio of between 66 and 68% by 2022 and a reduction in risk costs by 30 basis points;

– a dividend of EUR 2021 of EUR 1.65 and a share program, ie a total distribution rate of 50%.

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