French retail sector rebounds, prompting SocGen to increase annual targets
Société Générale Boasts Strong Q2 2025 Performance
Société Générale, a major French bank, has reported impressive financial results for the second quarter of 2025, showcasing a significant improvement in profitability compared to the same period last year.
The key factors driving this growth include strong revenue growth, strict cost control, improved operating leverage, a low cost of risk, high profitability, and strategic disposals.
Société Générale's revenue grew by 7.1% in Q2 2025, reaching €6.8 billion, excluding asset disposals. This growth was accompanied by a decrease in costs of -2.8%, excluding asset disposals and the Global Employee Share Ownership Programme (GESOP). These efficiency gains are demonstrated by a Cost/Income (C/I) ratio of 63.8%.
The bank's low cost of risk stands at 25 basis points, at the lower end of the 2025 target range (25-30bps). This, coupled with a Return on Tangible Equity (ROTE) of 9.7%, up 2.3 percentage points from 7.4% in Q2 2024, highlights the bank's impressive financial performance.
Strategic disposals, such as the completion of the disposal of SG Burkina Faso and the announced sale of SG Cameroon, have contributed to financial discipline and capital generation.
These factors collectively contributed to a group net income of €1.5 billion in Q2 2025, reflecting strong underlying business performance and disciplined financial management.
Slawomir Krupa, the CEO of Société Générale, stated that they are committed to executing their 2026 roadmap for sustainable and profitable growth. The group's net income jumped 31% to €1.45 billion in the second quarter compared to the same period last year.
The bank's net interest income (NII) increased by 15% in the second quarter, and its investment banking division posted revenues in line with analysts' expectations. The division that houses Société Générale's core French retail business doubled its net earnings in the second quarter.
The group's net income was well above the €1.19 billion estimate of 15 analysts compiled by the company. The revenues of Société Générale for the specified period were €6.79 billion, exceeding analysts' average estimate.
In response to these positive results, Société Générale has raised its annual profit target for 2025. The new target for return on tangible equity is around 9%, up from above 8%. Goldman Sachs welcomed an interim dividend of 61 cent per share to be paid in October and a €1 billion share buyback set for August.
Despite these impressive results, Société Générale's valuation remains below its book value. However, improved cost management has contributed to a rise in the bank's shares by around 120% in the past year.
CEO Slawomir Krupa, who took the reins in 2023, is pressing ahead with turnaround efforts. Sales from trading in fixed income and currencies at Société Générale increased by 7.3% to €615m. However, equities trading revenue fell by 2.9% to €962m.
Despite a less significant benefit from increased market volatility compared to its Wall Street peers and larger French rival BNP Paribas, Société Générale's trading business has shown resilience. The cost-to-income ratio target for this year is below 65%, previously set at below 66%.
The rebound in the retail unit builds on momentum seen in the first quarter. Société Générale's underperformance in the past was due to repeated missed targets, a rogue trading scandal during the 2008 financial crisis, and a costly exit from Russia following the country's invasion of Ukraine. However, it appears that the bank is now on a positive trajectory.
The impressive Q2 2025 financial performance of Société Générale showcases a significant boost in business profitability, attributable to factors such as strong revenue growth, cost control, and strategic business decisions. The bank's increased net income, surpassing analysts' estimates, and the raised annual profit target for 2025 underscore the successful execution of their business strategy.
