SocGen on course for weakest 2023 results among France's biggest banks

Société Générale SA is forecast to record the largest fall in full-year 2023 revenue and profit among France's three big listed banks, S&P Capital IQ consensus estimates data shows.

The country's third-largest lender is expected to report a 46% year-over-year drop in net income to €3.01 billion off the back of a 9.3% decrease in revenue to €25.44 billion.

Revenue and profit are also set to fall at BNP Paribas SA as its accounts adjust to the negative impact of its sale of US lender Bank of the West in February. Revenue at France's largest bank is expected to fall about 7% to just under €47 billion, while net income will drop 9% to €9.75 billion, the data shows.

Crédit Agricole SA (CASA) is the only of the three banks forecast to grow revenue and profit. CASA is estimated to grow profit 2.6% year over year to €5.61 billion from a 6% increase in revenues to €25.22 billion.

Across the three banks, aggregate profit in 2023 is expected to fall almost 16% to €18.37 billion from revenues of €97.53 billion, a drop of 4.6%. The slump would follow two strong years for the banks, with each beating quarterly and annual records for revenues and profits at various times.

Fees flee

A sharp fall in fee income, particularly at SocGen and CASA, is expected to drive the contraction in the banks' aggregate annual performance. French banks rely heavily on fees and commissions relative to their European peers due to their sizeable corporate and institutional banking divisions. SocGen's 2023 fee income is expected to fall by almost a fifth, while CASA's decline is projected at more than 12%.

Limited net interest income (NII) growth will also weigh on revenues, the data shows, at a time when many European lenders are enjoying huge boosts to lending income from higher interest rates.

Deposit costs at the country's banks have jumped due to increases in the rates of regulated savings schemes such as the Livret A. The country's usury rate regulation also limited the pace at which lenders can offer higher rates on new loans. The largely fixed-rate profile of the banks' loan books has further prevented higher rates from passing on to borrowers.

The end of an ultra-cheap European Central Bank funding program, which had boosted eurozone lenders' NII by hundreds of millions of euros, has also hit the banks' NII.

The French lenders' international retail banking operations are offsetting some of the drag on domestic NII. CASA and SocGen are forecast to record modest NII growth, but BNP's NII is set to drop 7.8%, partially due to the Bank of the West sale. The fall at BNP means the three French banks are predicted to report an aggregate NII drop of 1.8% to €46.47 billion, the data shows.

– Access estimates data for SocGen on S&P Capital IQ Pro. – View aggregate financial highlights for France's banking sector on S&P Capital IQ Pro. – Compare bank performance by downloading the Peer Analysis template.

Expense control

A decrease in costs is expected to partly fuel the projected improvement in CASA's profits in 2023. The bank is forecast to reduce noninterest expenses by 3.2% to €14.12 billion in 2023.

BNP's sale of Bank of the West is forecast to contribute to a 9.3% drop in its noninterest expenses to €30.57 billion, while SocGen is forecast to achieve a 1.7% decrease in costs to €18.31 billion, the data shows.

Loan loss provisions (LLPs) in 2023 are expected to drop by an aggregate of 6.4% across the three banks. Both BNP and SocGen are projected to enjoy annual falls in LLPs for 2023, while an increase of almost 10% to €1.92 billion is forecast at CASA, the data shows.