©Reuters. The logo of French bank Societe Generale is seen in front of a bank branch in Nantes, France, February 4, 2022. REUTERS/Stephane Mahe/Files
PARIS (Reuters) – French lender Societe Generale (OTC:) on Thursday beat first-quarter earnings expectations but booked higher provisions for loans that are becoming non-performing as the economic fallout from the war in Ukraine hits its customers.
France’s third-biggest listed bank said net income rose 3.4% to 842 million euros ($892 million), with revenue up 16.6% as its domestic retail arm thrived and trade improved .
SocGen said it had increased provisions for bad loans because of the Russia-Ukraine conflict.
The bank said it now expects this year’s risk costs, which reflect provisions for bad loans, to reach 30 to 35 basis points, or between 1.7 billion and 1.9 billion euros. This compares to a previous forecast of less than 30 basis points.
These costs are in addition to previous depreciation.
The bank said in April it would exit Russia and sell its Rosbank business there to Interros Capital, a company linked to Russian oligarch Vladimir Potanin, writing off around €3.1 billion.
SocGen chief executive Frederic Oudea said he expects to close the Rosbank deal in the coming weeks, adding that he doesn’t see sanctions against Potanin from Australia and Canada as a hurdle to the sale.
Strong trading helped the lender offset the impact of the Ukraine conflict, albeit with lower sales increases than its larger French rival BNP Paribas (OTC:).
SocGen’s equity trading revenue rose nearly 20% to more than €1 billion, while its fixed income and currency trading revenue rose 21.7%.
BNP Paribas reported a 60.9% increase in equity trading revenues and a 47.9% increase in fixed income, currencies and commodities for the first quarter.
Analysts at Jefferies said SocGen posted a “strong string” of earnings, with all its businesses beating expectations, from French retail banking to corporate and investment banking.
SocGen shares were up 2.1% by 1000 GMT, outperforming the banking index, which was up 1.3%.
Nonetheless, the bank’s exit from Russia has reduced its capital cushion. The CET1 capital ratio, a key measure of capital strength, fell to 12.9% at the end of March.
“Capital is a small mistake,” Jefferies said.
The EUR 3.1 billion financial loss from the Rosbank sale consists of EUR 2 billion of Rosbank’s book value, the rest is related to the liquidation of ruble conversion reserves.