Société Générale SA's results for the fourth quarter and full year 2020 were weighed down by higher cost of risk due to an increase in provisions amid the COVID-19 pandemic.
The French banking group reported a fourth-quarter 2020 consolidated group net income of €470 million, down 28.1% from €654 million a year earlier.
Net cost of risk reached €689 million in the quarter, widening from €371 million a year ago, including provisions related to performing loans for a total amount of €367 million. The group expects cost of risk to be lower in 2021 than in 2020.
Operating expenses amounted to €4.35 billion, down from €4.50 billion a year before, and included a €210 million restructuring charge recognized in the quarter. The group said it intends to continue to "strictly manage" its costs in 2021.
The group booked net losses from other assets amounted to €94 million, compared with year-ago losses of €125 million.
Net banking income declined year over year to €5.84 billion from €6.21 billion. Return on equity at the end of the quarter stood at 2.4%, against 3.7% in the previous year. Operating income fell over the period to €798 million from €1.34 billion.
French retail banking contributed €104 million to the group net income, down from €230 million a year ago. Net income from the international retail banking and financial services division was €376 million, compared with €463 million a year before.
The global markets and investor solutions division posted a net income of €280 million, a decrease from €291 million in the prior year, while the corporate center reported a net loss of €290 million, narrowing from a year-ago loss of €330 million.
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For full year 2020, SocGen posted a group net loss of €258 million, compared with a net income of €3.25 billion a year before. Loss per share amounted to €1.02, compared with EPS of €3.05 in 2019.
Net cost of risk widened to €3.31 billion in 2020 from €1.28 billion a year ago, mainly due to an increase in provisions in respect of performing loans totaling €1.37 billion.
The group's common equity Tier 1 ratio stood at 13.4% at the end of 2020, about 440 basis points above the regulatory requirement. In 2021, SocGen expects its CET1 ratio to be significantly higher than its aim of 200 basis points above the requirement.
The board of directors will propose a cash dividend of 55 cents per share, to be paid May 27.
The bank also plans to launch a share buyback program in the fourth quarter of 2021 for an amount of roughly €470 million, subject to the non-renewal of the ECB's recommendation and the authorization for the program's implementation.
Regarding the group's distribution policy for 2021, the board of directors confirmed a payout ratio of 50% of underlying group net income, with the dividend component being paid in cash. This could include a share buyback component of up to 10%.
In 2020, SocGen carried out a strategic review of its global markets business and launched a cost reduction plan targeting a net reduction of about €450 million between now and 2022-2023. The group said it will present its global banking and investor solutions' strategy on May 10.
