2013-02-13 07:15:03 -
ACTIVITY AND 2012 RESULTS
REGULATED INFORMATION
Paris, February 13th, 2013
2012 TRANSFORMATION OBJECTIVES ALL ACHIEVED
* Balance sheet significantly strengthened
* Corporate and Investment Banking's loan disposal programme completed
* Business asset disposal programme implemented: sale of Geniki and TCW,
agreement for the disposal of the Egyptian subsidiary, NSGB
* Satisfactory liquidity structure
Core Tier 1 ratio((1)): 10.7%, increase of +165 bp in one year
Confirmation of the Basel 3 Core Tier 1 target at end-2013 (9%-9.5%)
* Group's profit-generating capacity maintained
* NBI((2))
stable (-0.3%) vs. 2011, at EUR 24,963m
Good business performance despite resource constraints
* Operating expenses down -4.1%*
Increase in the net cost of risk (EUR -3,935m, +11.9%((3))), related to the
deteriorated macroeconomic situation in Europe
* Underlying Group net income: EUR 3,368m
Book Group net income: EUR 774m, including EUR -2,594m related to non-economic
and non-recurring items, and Corporate and Investment Banking's legacy asset
portfolio((2))
* EPS((4)): EUR 0.64, proposed dividend payment of EUR 0.45 per share, with a
scrip dividend option, corresponding to a payout ratio of 26% (excluding the
revaluation of own financial liabilities)
Q4 2012: UNDERLYING GROUP NET INCOME OF EUR 537M.
CONTINUED IMPROVEMENT IN THE CORE TIER 1 RATIO((1)): +40 BP IN Q4 12
* NBI((2)) of EUR 5,910m, -1.0% vs. Q4 11
* Non-economic or non-recurring items had a significant impact on book income:
book Group net income of EUR -476m
+------------------------------------------------------------------------------+
|(1) Calculated according to EBA Basel 2.5 standards (Basel 2 standards|
|incorporating CRD3 requirements). |
|(2) Excluding non-economic or non-recurring items and legacy assets.|
|Non-economic items: revaluation of own financial liabilities and the Group's|
|loan portfolio hedges. Non-recurring items: goodwill write-down, capital|
|gains/losses on business assets sold or available-for-sale assets, impact on|
|profit and loss of debt buybacks, restructuring of Greek sovereign debt.|
|Impact on Group net income of non-economic items: |
|EUR -859m in 2012, including EUR -822 million for the revaluation of own|
|financial liabilities; non-recurring items: EUR -1,319m in 2012; legacy|
|assets: EUR -416m in 2012. |
|(3) Excluding litigation issues, legacy and Greek sovereign assets.|
|Steady decline in the cost of risk in basis points. |
|(4) After deducting interest, net of tax effect, to be paid to holders|
|of deeply subordinated notes and undated subordinated notes (respectively EUR|
|266 million and EUR 27 million). At end-December 2012, the capital gain net of|
|tax and accrued unpaid interest relating to buybacks of deeply subordinated|
|notes amounted to EUR 2 million. |
|* When adjusted for changes in Group structure and at constant|
|exchange rates |
+------------------------------------------------------------------------------+
The Board of Directors of Societe Generale met on February 12th, 2013 and
examined the Group's financial statements for 2012. Group net income came to EUR
774 million for 2012 and net banking income totalled EUR 23,110 million. Group
net income amounted to EUR -476 million in Q4, with net banking income of EUR
5,130 million.
Given these results, the Board of Directors will propose the distribution of a
dividend of EUR 0.45 per share, with a scrip dividend option, to the General
Meeting of Shareholders. This corresponds to a payout ratio of 26% of Group net
income, net of the effect of the revaluation of own financial liabilities.
2012 marked the achievement of key milestones in the transformation process
under way since 2010:
* completion of Corporate and Investment Banking's deleveraging programme
(disposal of EUR 16 billion of loan portfolio assets since end-June 2011)
and continuation of the legacy asset disposal programme (disposal of EUR 19
billion of legacy assets over the last 18 months).
* business refocusing and business asset portfolio optimisation, marked mainly
by the sale of the Greek subsidiary, Geniki, in International Retail
Banking, and TCW in Private Banking, Global Investment Management and
Services, the agreement to sell the Egyptian subsidiary, NSGB, as well as by
the trend in the Group's risk-weighted assets, which fell in 2012. The asset
disposal programme has thus already achieved the lower end of its target
range and considerably reduced balance sheet risks.
* very satisfactory improvement in the financing structure, with an improved
loan/deposit ratio, high medium/long-term debt issuance volumes and extended
maturities.
* implementation of efficiency measures, which resulted in a decline in
operating expenses vs. 2011.
Coupled with the solid business results, these initiatives helped boost the
Group's Core Tier 1 ratio(1) to 10.7% at year-end, an increase of +165 basis
points in one year.
Although exposed to a sharply slowing environment, Retail Banking posted
generally satisfactory revenues. Accordingly, the French Networks enjoyed stable
net banking income. Revenues were also stable* in International Retail Banking
but concealed a more mixed situation: revenues were solid in the Czech Republic,
Russia, Mediterranean Basin and Sub-Saharan Africa, whereas other countries in
Eastern Europe experienced reduced activity due to a deteriorated economic
environment. Lastly, Specialised Financial Services and Insurance revenues grew,
especially in the Insurance activity. Corporate and Investment Banking, whose
revenues were stable vs. 2011 despite the disposal of loan portfolios and legacy
assets under way for 18 months, benefited from the gradual normalisation of the
markets in 2012, particularly in Fixed Income, Currencies & Commodities
activities. In an environment that remained sluggish throughout the year - low
rates, reduced brokerage volumes - Private Banking, Global Investment Management
and Services maintained its revenues at the same level as the previous year.
The Group's cost-cutting efforts resulted in a significant decline in operating
expenses. These were sharply lower, down -4.1%* vs. 2011 (and -2.2% excluding
restructuring costs recorded in 2011).
The commercial cost of risk, measured in basis points(2) amounted to 75 basis
points for 2012,
vs. 67 basis points in 2011, reflecting the deterioration in the macroeconomic
environment in Europe.
The 2012 results include EUR -2,594 million of non-economic items, the impact of
the Group's transformation (asset disposals and reduction in the loan portfolio
at SG CIB), the restructuring of Greek sovereign debt, and Corporate and
Investment Banking's legacy asset portfolio(3).
When corrected for these items, Group net income totalled EUR 3,368 million in
2012.
Commenting on the Group's 2012 results, Frédéric Oudéa - Chairman and CEO -
stated:
"Societe Generale successfully continued with its transformation process in
2012, achieving all the objectives set at the beginning of the year. At the same
time as carrying out a proactive portfolio disposal programme and business
refocusing, the Group succeeded, in a turbulent economic environment, in
maintaining a good level of activity in order to serve its customers and finance
the economy. The bank also significantly improved its financial solidity both in
terms of capital and liquidity. On the strength of this momentum, the Group has
secured its "Basel 3" Core Tier 1 capital target of 9%-9.5% at end-2013 and is
approaching this year of economic and regulatory transition with confidence. By
initiating the second phase of its transformation plan, with an objective of
increasing commercial and operating efficiency, Societe Generale will reinforce
the medium-term growth and profitability potential of the Group and its
businesses."
1. GROUP CONSOLIDATED RESULTS
---------------------------------
| ---------- ---------
In EUR m | 2011 2012 Change Q4 11 Q4 12 Change
| 2012 vs. 2011 Q4 vs. Q4
----------------------+---------------------------------------------------------
Net banking income | 25,636 23,110 -9.9% 6,010 5,130 -14.6%
|
On a like-for-like| -10.3% -14.5%
basis*|
----------------------+---------------------------------------------------------
Operating expenses |(17,036) (16,438) -3.5% (4,401) (4,138) -6.0%
|
On a like-for-like| -4.1% -6.5%
basis*|
----------------------+---------------------------------------------------------
Gross operating income| 8,600 6,672 -22.4% 1,609 992 -38.3%
|
On a like-for-like| -22.4% -36.6%
basis*|
----------------------+---------------------------------------------------------
Net cost of risk |(4,330) (3,935) -9.1% (1,075) (1,314) +22.2%
----------------------+---------------------------------------------------------
Operating income | 4,270 2,737 -35.9% 534 (322) NM
|
On a like-for-like| -42.0% NM
basis*|
----------------------+---------------------------------------------------------
Impairment losses on | (265) (842) NM (65) (392) NM
goodwill |
----------------------+---------------------------------------------------------
Group net income | 2,385 774 -67.5% 100 (476) NM
----------------------+---------------------------------------------------------
| ----------
| 2011 2012
+------------------
Group ROTE (after tax)| 7.5% 1.4%
Net banking income
The Group's net banking income totalled EUR 23,110 million in 2012, with EUR
5,130 million in Q4 12.
If non-economic or non-recurring items and legacy assets are stripped out,
underlying revenues amounted to EUR 24,963 million, stable (-0.3%) vs. the
previous year. Underlying net banking income was slightly lower (-1.0%) in Q4
12 than in Q4 11.
* The French Networks posted revenues of EUR 8,161 million in 2012 (EUR 2,068
million in Q4 12). They were stable excluding the PEL/CEL effect year-on-
year and vs. Q4 11, in a sharply slowing economic environment, underpinned
by interest margins that held up well;
* At EUR 4,943 million in 2012, International Retail Banking's net banking
income was stable (-0.1%*) vs. 2011. However, it was lower quarter-on-
quarter (-6.5%* in Q4 12 vs. Q4 11 at EUR 1,228 million). Lacklustre
economic activity in Eastern Europe was offset by increased activity in the
Czech Republic, Russia, Mediterranean Basin and Sub-Saharan Africa;
* Corporate and Investment Banking's core activities posted 2012 revenues in
line (-2.0%*) with the figures for 2011 at EUR 6,457 million (with EUR
1,465 million in Q4 12, +22.8%* vs. Q4 11). They were driven by the recovery
in 2012 of Fixed Income, Currencies & Commodities activities, which
partially offset loan portfolio disposal costs (EUR -489 million in 2012).
Corporate and Investment Banking's legacy assets made a negative contribution of
EUR -268 million to the division's revenues in 2012 (with EUR -5 million in Q4
12) vs.
EUR -476 million in 2011 (including EUR -524 million in Q4 11).
Corporate and Investment Banking's revenues totalled EUR 6,189 million in 2012,
with EUR 1,460 million in Q4 12.
* Specialised Financial Services and Insurance's revenues totalled EUR 3,489
million in
2012 (+1.4%* vs. 2011), underpinned by growth in the Insurance activity
(+12.5%* vs. 2011 at EUR 684 million). Specialised Financial Services
generally maintained its revenues, at
EUR 2,805 million in 2012 (-1.0%*), despite considerable resource
constraints. The division's
Q4 12 revenues totalled EUR 894 million (up +5.1%* vs. Q4 11), with EUR 715
million for Specialised Financial Services (+2.4%* vs. Q4 11) and EUR 179
million for the Insurance activity (+17.8%* vs. Q4 11).
* Private Banking, Global Investment Management and Services' net banking
income was
-2.8%* lower than in 2011 at EUR 2,160 million. Q4 12 revenues totalled EUR
553 million, up +9.0%* vs. Q4 11. This performance was achieved in a
generally unfavourable environment for the business due to persistently low
rates and reduced brokerage activity.
The accounting impact on net banking income of the revaluation of the Group's
own financial liabilities was EUR -1,255 million in 2012 (with EUR -686 million
in Q4 12), reflecting tightening financing spreads in the banking sector during
the year. In 2011, the revaluation of the Group's own financial liabilities
boosted book net banking income by EUR +1,177 million (with EUR + 700 million in
Q4 11), due to the widening of these spreads. At the same time, the valuation of
the bank's loan portfolio hedges caused net banking income to fall by EUR -26
million in Q4 12, taking the full-year impact of this valuation to EUR -56
million.
Operating expenses
At EUR -16,438 million in 2012, operating expenses were down -4.1%* (-2.2% when
restated for total restructuring provisions recorded at end-2011). Operating
expenses amounted to EUR -4,138 million in Q4 12, down -0.8% excluding
restructuring costs vs. the same period in 2011.
There were significant efforts to control operating expenses in Corporate and
Investment Banking
(-8.7% vs. 2011)(1), Private Banking, Global Investment Management and Services
(-3.4%((1))), Specialised Financial Services and Insurance (-1.0%((1))) and the
French Networks (-0.4%((1))).
When restated for legacy assets, non-economic and non-recurring items, the cost
to income ratio was -1.3 points lower than in 2011, at 65.6% for 2012.
Operating income
The Group's gross operating income came to EUR 6,672 million for 2012. This was
substantially lower than in 2011 due to the accounting effect of the revaluation
of the Group's own financial liabilities (-22.4%*). Gross operating income
totalled EUR 992 million for Q4 12 (vs.
EUR +1,609 million in Q4 11). Gross operating income came to EUR 7,927 million,
excluding the effect of the revaluation of the Group's own financial
liabilities, up 6.8% vs. 2011. In Q4 12, gross operating income, corrected for
the impact of the revaluation of the Group's own financial liabilities, was
EUR 1,678 million (vs. EUR 909 million in Q4 11).
The Group's net cost of risk amounted to EUR -3,935 million for 2012, vs. EUR
-4,330 million in 2011.
The Group's commercial cost of risk (expressed as a fraction of outstanding
loans) amounted to 75((2)) basis points in 2012 vs. 67((2)) basis points in
2011.
* The French Networks' cost of risk was higher at 50 basis points (41 basis
points in 2011) reflecting the deteriorating economic environment, notably
for Corporates where the Group posted an increase in provisions in respect
of medium-sized companies in the industrial sector.
* At 183 basis points (vs. 177 basis points in 2011), International Retail
Banking's cost of risk was slightly higher. However, the trend was mixed
according to region, with a low point reached in Russia in Q4 12 but a still
high level in Romania, reflecting the deteriorated economic situation in the
country.
* The cost of risk of Corporate and Investment Banking's core activities was
contained at
31 basis points (vs. 11 basis points in 2011) and remained at a low level.
Legacy assets' net cost
of risk amounted to EUR -262 million in 2012 (considerably lower than the EUR
-425 million in 2011).
* Specialised Financial Services' cost of risk fell to 125 basis points (vs.
149 basis points in 2011), reflecting the notable improvement in Consumer
Finance.
The Group also booked a EUR -300 million provision for litigation issues in Q4
12.
The Group's NPL coverage ratio was 77% at end-2012 (76% at end-2011).
The decline in the net cost of risk (EUR -3,935 million in 2012 vs. EUR -4,330
million in 2011) can be attributed principally to a base effect related to
provisions booked in respect of Greek sovereign risk in 2011.
The Group's operating income totalled EUR 2,737 million for 2012, substantially
lower than in 2011, and EUR -322 million for Q4 12 (vs. EUR +534 million in Q4
11). The decline was primarily due to the impact of the revaluation of the
Group's own financial liabilities.
Operating income came to EUR 3,992 million, excluding the effect of the
revaluation of the Group's own financial liabilities, vs. EUR 3,093 million in
2011, an increase of more than 29%. In Q4 12, operating income, corrected for
the impact of the revaluation of the Group's own financial liabilities, was EUR
364 million (vs. EUR -166 million in Q4 11).
Net income
After taking into account tax (the Group's effective tax rate was 15.0% in 2012
vs. 30.9% in 2011) and non-controlling interests, Group net income totalled
EUR 774 million for 2012 (EUR -476 million in
Q4 12), vs. EUR 2,385 million in 2011 (and EUR 100 million in Q4 11).
Book Group net income was EUR -476 million in Q4 (EUR 100 million in Q4 11),
primarily due to the effect of non-economic and non-recurring items at the end
of the year.
When corrected for non-economic items(1) (EUR -859 million), non-recurring items
(EUR -1,319 million(2)) and the impact on the accounts of Corporate and
Investment Banking's legacy asset portfolio (EUR -416 million), Group net income
amounted to EUR 3,368 million in 2012, vs.
EUR 3,515 million in 2011.
The Group's underlying ROE stood at 4.3% in Q4 12 and 7.3% for the year. The
underlying ROTE came to 8.9% for 2012(3).
Earnings per share amounts to EUR 0.64 for 2012, after deducting interest
payable to holders of deeply subordinated notes and undated subordinated
notes(4).
2. THE GROUP'S FINANCIAL STRUCTURE
--------------------------------------
----------------------------------------
Group shareholders' equity totalled EUR 49.8 billion(1) at December 31st, 2012
and tangible net asset value per share was EUR 48.59 (corresponding to net asset
value per share of
EUR 56.93, including EUR 0.89 of unrealised capital gains). The Group acquired
30.1 million Societe Generale shares during 2012 and proceeded to dispose of
31.0 million shares under the liquidity contract concluded on August 22nd, 2011.
All in all, at end-December, 2012, Societe Generale possessed 26.3 million
shares (including 9 million treasury shares), representing 3.37% of the capital
(excluding shares held for trading purposes). At this date, the Group also held
3.1 million purchase options on its own shares to cover stock option plans
allocated to its employees.
The Group's funded balance sheet(2), after the netting of insurance, derivative
outstandings, repurchase agreements and accruals, totalled EUR 652 billion at
December 31st, 2012, up
EUR +52 billion vs. December 31st, 2011.
The balance sheet structure has been significantly strengthened since end-2011.
In particular, the Group has increased its surplus of stable sources over long-
term uses of funds. Within stable sources of funds, customer deposits rose by
EUR 16 billion, an increase of +6% in 2012 or +8% excluding Geniki and NSGB
deposits. Medium/long-term financing rose by EUR 19 billion, due partly to the
issuance of EUR 27 billion of medium/long-term debt during the year. This amount
was well above the initial programme of EUR 10 billion to EUR 15 billion.
Shareholders' equity (EUR 52 billion) was boosted by EUR +3 billion in 2012, or
+5% vs. end-2011. At the same time, the Group's deleveraging strategy led to
customer loan outstandings falling by EUR 18 billion to EUR 369 billion. The
Group's loan/deposit ratio((2)) declined by -13 points in 2012.
The Group also increased its liquidity reserves in 2012, from EUR 84 billion at
end-2011 to
EUR 133 billion at end-2012. They covered 101% of the Group's short-term
refinancing needs at end-2012. The latter remained stable as a proportion of the
funded balance sheet, at 20% of total financed assets. In absolute terms, short-
term sources of funds increased by EUR 16 billion in 2012 testifying to the
abundant liquidity in the system and the confidence in the Societe Generale
name.
The Group's risk-weighted assets were lower than in 2011 at EUR 324.1 billion
(EUR 349.3 billion at end-2011, or -7% in 2012).
Changes in risk-weighted assets reflect the transformation under way in the
Group with, in particular, a decline of -12% in the outstandings of Corporate
and Investment Banking's core activities and -52% in legacy assets. Specialised
Financial Services' resource constraints resulted in an overall decline of -4%
in their risk-weighted assets in 2012, whereas the outstandings of the French
Networks grew +3% over the same period reflecting the Group's ongoing financial
support to the economy and its customers. International Retail Banking's risk-
weighted assets fell -3% in 2012, primarily on the back of Geniki's removal from
the Group's structure.
The Group's Tier 1 ratio was 12.5% at December 31st, 2012 (10.7% at end-2011),
while the Core
Tier 1 ratio, which was 9.0% at December 31st, 2011 under "Basel 2.5" and
calculated according to European Banking Authority (EBA) rules, reached 10.7% at
end-December 2012, representing an increase of +165 basis points since the
beginning of the year. The increase is due mainly to income generation in 2012
(+67 basis points, net of the dividend provision), a decline in the Group's
risk-weighted assets, and actions undertaken to optimise the legacy asset
portfolio and dispose of loans in Corporate and Investment Banking's credit
portfolio (+77 basis points). The disposal of Geniki, finalised in December
2012, helped boost the Core Tier 1 ratio by +3 basis points at December
31st, 2012.
The Group is rated A2 by Moody's, A by S&P and A+ by Fitch.
3. French networks
----------------------
| --------- ---------
In EUR m | 2011 2012 Change Q4 11 Q4 12 Change
| 2012 vs. 2011 Q4 vs. Q4
----------------------+---------------------------------------------------------
Net banking income | 8,165 8,161 0.0% 2,054 2,068 +0.7%
|
| 0.0%(a) 0.0%(a)
----------------------+---------------------------------------------------------
Operating expenses |(5,248) (5,264) +0.3% (1,358) (1,382) +1.8%
|
| -0.4%(b) -0.8%(b)
----------------------+---------------------------------------------------------
Gross operating income| 2,917 2,897 -0.7% 696 686 -1.4%
|
| +0.8%(a)(b) +1.6%(a)(b)
----------------------+---------------------------------------------------------
Net cost of risk | (745) (931) +25.0% (237) (300) +26.6%
----------------------+---------------------------------------------------------
Operating income | 2,172 1,966 -9.5% 459 386 -15.9%
----------------------+---------------------------------------------------------
Group net income | 1,428 1,291 -9.6% 302 254 -15.9%
----------------------+---------------------------------------------------------
(a) Excluding PEL/CEL
(b) Excluding systemic
tax
In a deteriorated macroeconomic environment in France, the French Networks'
commercial activity was satisfactory in 2012 and once again demonstrated the
solidity of their customer franchises.
During 2012, the number of individual customers for the three brands (Societe
Generale, Crédit du Nord and Boursorama) exceeded 11 million (+162,000
individual custmers in 2012).
Against a backdrop of continuing fierce competition for savings inflow,
outstanding balance sheet deposits rose +5.4% vs. 2011 to EUR 141.6 billion. By
customer segment, deposit inflow was strong for individual customers (+6.0%) and
saw a gradual pick-up for business customers (+1.7%). By type of savings
vehicle, deposit growth was driven by the inflow on term deposits and deposit
certificates (+30.6%): these benefited from the success of the "CAT Tréso +"
(Treasury + term account) offering aimed at businesses. There was also a sharp
increase in regulated savings. These continued to be driven, firstly, by the
growth in livret A (passbook savings account) outstandings (+31.4%) which
benefited from the raising of the ceiling in Q4 12 and secondly, by the success
of the "CSL +" (ordinary savings account) offering (CSL outstandings up +6.8%).
This growth was accompanied by positive net life insurance inflow of EUR +165
million in 2012, in a market that experienced a net outflow for the first time
(EUR -3.4 billion vs. the same period the previous year).
The French Networks remained fully committed to serving their customers and
continued to actively support the economy, assisting businesses and individuals
with the financing of their projects, as testified by the growth in outstanding
loans (+3.2% vs. 2011) to EUR 176.1 billion.
Outstanding loans to business customers totalled EUR 79.5 billion (+3.4%).
Outstanding operating loans rose +9.0% to EUR 12.8 billion and investment loans
+2.2% to EUR 64.1 billion.
Outstanding loans to individuals rose +2.9% over the period, still driven by the
growth in outstanding housing loans (+3.5%). In line with the market, housing
loan production was nevertheless markedly lower than in 2011 on the back of weak
demand.
The average loan/deposit ratio stood at 124% in 2012 vs. 127% in 2011, an
improvement of 3 points. The average loan/deposit ratio for Q4 12 was 121%, down
-2 points vs. the previous quarter.
The French Networks' revenues were resilient, with net banking income of EUR
8,161 million, stable excluding the PEL/CEL effect vs. 2011. Net interest income
was 1.0% higher (excluding the PEL/CEL effect) than in 2011, with the increase
in outstanding deposits offsetting the increasingly marked decline in
reinvestment rates during the year. The loan margin remained virtually stable.
Commissions declined -1.2% vs. 2011 with mixed trends. Service commissions rose
+2.1% vs. the same period, driven by buoyant transaction levels with business
customers (+8.1%), and partially offset the decline in financial commissions (-
12.4%) on the back of low financial transaction volumes originating from
individual customers.
When restated for the impact of the systemic tax (EUR -35.5 million), operating
expenses were -0.4% lower than in 2011, reflecting the effect of the cost-saving
plans implemented. These focused primarily on the control of IT expenses and the
decline in the use of external service providers.
The French Networks generated gross operating income of EUR 2,897 million, up
+0.8% (excluding PEL/CEL effect and restated for the impact of systemic taxes)
vs. 2011.
Against the backdrop of a weak French economy, the French Networks' cost of risk
amounted to
50 basis points in 2012, up 9 basis points vs. 2011.
The French Networks' contribution to Group net income totalled EUR 1,291 million
in 2012, down
-9.6% vs. 2011.
The French Networks' Q4 net banking income totalled EUR 2,068 million, stable
excluding the PEL/CEL effect vs. Q4 11. Operating expenses came to EUR 1,382
million. When restated for the impact of systemic taxes, they were down -0.8%
vs. Q4 11. In a sluggish economic environment, the cost of risk was
significantly higher at 65 basis points in Q4 12. The French Networks'
contribution to Group net income totalled EUR 254 million, down -15.9% vs. Q4
11.
4. InternationaL RETAIL BANKING
-----------------------------------
| --------- -------
In EUR m | 2011 2012 Change Q4 11 Q4 12 Change
| 2012 vs. 2011 Q4 vs. Q4
----------------------------+---------------------------------------------------
Net banking income | 5,017 4,943 -1.5% 1,339 1,228 -8.3%
|
On a like-for-like basis*| -0.1% -6.5%
----------------------------+---------------------------------------------------
Operating expenses |(2,988) (3,077) +3.0% (765) (829) +8.4%
|
On a like-for-like basis*| +3.6% +9.4%
----------------------------+---------------------------------------------------
Gross operating income | 2,029 1,866 -8.0% 574 399 -30.5%
|
On a like-for-like basis*| -5.4% -27.0%
----------------------------+---------------------------------------------------
Net cost of risk |(1,284) (1,348) +5.0% (379) (336) -11.3%
----------------------------+---------------------------------------------------
Operating income | 745 518 -30.5% 195 63 -67.7%
|
On a like-for-like basis*| -39.1% -70.7%
----------------------------+---------------------------------------------------
Impairment losses on | 0 (250) NM 0 0 NM
goodwill |
----------------------------+---------------------------------------------------
Group net income | 325 (51) NM 75 23 -69.3%
----------------------------+---------------------------------------------------
Within International Retail Banking, 2012 was marked by three major events. In
response to a very deteriorated environment in Greece and after supporting its
subsidiary for several years, the Group endeavoured to find an alternative,
successful strategy for the future of its subsidiary, against the backdrop of
consolidation in the Greek banking sector. Accordingly, the Group sold the
entire shareholding (99.08%) in its subsidiary Geniki to Piraeus Bank in
December 2012. The pre-tax result of this deal, which was concluded on December
14th, 2012, was recorded in the Corporate Centre, under "net gains/losses on
other assets" for a total of EUR -375 million. Geniki's operating results
continued to be included in those of International Retail Banking until end-
November 2012 (i.e. a contribution to the Group net income of International
Retail Banking of EUR -164 million in 2012).
Moreover, in August 2012, the Group received an expression of interest from
Qatar National Bank (QNB) regarding the acquisition of the majority shareholding
(77.17%) in its Egyptian subsidiary, National Société Générale Bank (NSGB). The
Group accepted QNB's offer, which values NSGB's total capital at twice the value
of its book equity as at September 30th, 2012.
Finally, the Group also proceeded with the rationalisation of its Russian
activities, and disposed of its Byelorussian subsidiary and its debt recovery
activity.
However, these decisions do not reflect a shift in the Group's international
development strategy. International Retail Banking continues to focus its
activity on the following strategic areas: the creation of a leading player in
Russia and targeted expansion in high-potential countries in terms of growth or
the use of banking services.
The commercial performance remained positive in an environment marked by the
economic slowdown in Europe. At end-2012, excluding Greece and Egypt,
International Retail Banking's outstanding loans totalled EUR 62.8 billion, up
+3.2%* year-on-year, driven by the strong growth for individual customers (up
8.7%*). Over the same period, deposits were +2.1%* higher at EUR 61.9 billion,
thanks to the robust inflow in Central and Eastern European countries (+7.5%*).
Overall, the loan/deposit ratio remained close to equilibrium level (101% at
end-December 2012).
International Retail Banking revenues totalled EUR +4,943 million in 2012,
stable* vs. end-December 2011 and marked by fairly distinct trends according to
region: revenues were higher in Russia, the Czech Republic, Mediterranean Basin
and Sub-Saharan Africa, whereas Romania and the other Central and Eastern
European countries experienced a decline in revenues, hampered primarily by the
economic slowdown.
At EUR 3, 077 million in 2012, operating expenses were up +2.6%* excluding
systemic tax
(EUR -30.3 million recorded in Q4 12). This moderate increase, compared with the
level of inflation, reflects expenses under control in the Central and Eastern
European subsidiaries (decline notably in Russia and Romania) and organic growth
focused on the most dynamic regions.
The division posted gross operating income of EUR 1,866 million in 2012. The
cost to income ratio was 62.2%.
International Retail Banking's net cost of risk amounted to EUR 1,348 million in
2012 (up +46.0%*). This was due in particular to the substantial increase
recorded in Romania mainly as a result of a very deteriorated macroeconomic
environment.
International Retail Banking's contribution to Group net income totalled EUR -51
million in 2012, or EUR +363 million when restated for the contribution of
Greece and the goodwill write-down in respect of Russia recorded in Q2 12 (EUR
-250 million).
International Retail Banking's net banking income amounted to EUR 1,228 million
in Q4 12 (down
-6.5%*), marked primarily by the economic slowdown in Europe. Over the same
period, operating expenses rose +5.3%* excluding systemic tax, reflecting mixed
trends: good control of operating expenses in Russia, Romania and the Czech
Republic but an increase in expenses to support expansion of the network in Sub-
Saharan Africa and the Mediterranean Basin. The contribution to Group net income
came to EUR 23 million.
In Russia, the transformation of the Rosbank subsidiary was stepped up in 2012.
Measures to improve operating efficiency continued throughout the year: the
headcount was reduced by more than 10%, the network's structure was streamlined
(rationalisation of office space) and a number of non-strategic activities
(Byelorussia, debt recovery entity) for the Group were sold. Against this
backdrop, and despite a high inflation level of around 5%, proactive cost
management helped reduce operating expenses by -1.5%* over the year. Lastly, the
commercial strategy focused on boosting rouble-denominated loans (+27.4%*)
resulted in revenue growth for the year of +1.5%*, still underpinned by robust
lending to individuals. If the EUR -250 million goodwill write-down is stripped
out, Rosbank's contribution to Group net income was slightly negative in 2012,
with a positive contribution of EUR 39 million in H2 2012 to the division's
results.
In the Czech Republic, Komercní Banka enjoyed strong commercial activity in
2012, both for loans (+4.8%*) and deposits (+3.9%*). This resulted in revenue
growth of +1.5%* vs. 2011, while operating expenses remained stable* over the
same period.
The contribution to Group net income came to EUR 265 million in 2012 (and EUR
58 million in Q4 12), providing further evidence of the subsidiary's profit-
generating capacity despite the economic slowdown.
In Romania (BRD), in response to a durably deteriorated environment, the Group
maintained a selective loan approval policy (virtually stable* outstandings in
2012), while at the same time strengthening its deposit base (+5.1%*). The
decline in the rates charged on loans combined with an increase in the funding
cost adversely affected BRD's margins and led to a drop in 2012 revenues
(-5.9%*). Against this backdrop, the Group continued to rigorously control costs
(decline of -2.2%* in 2012 thanks partly to the reduction in the headcount). The
marked deterioration in the economic situation resulted, in particular, in a
sharp increase in the net cost of risk to EUR -437 million in 2012. This caused
BRD to make a negative contribution of EUR -84 million.
In other Central and Eastern European countries, excluding Greece, the strong
deposit inflow continued throughout the year (+7.5%* vs. 2011) and loan activity
remained dynamic (+2.5%*).
In particular, there was a sharp increase in outstandings in Serbia (+17.6%*)
and Bulgaria (+9.4%*). Revenues were down -2.6%* vs. 2011, adversely affected by
margins under pressure.
In the Mediterranean Basin, the Group bolstered its network with 17 new branches
in 2012. It posted growth in outstanding loans excluding Egypt of +2.2%*, driven
by individual customers (+10.7%*). Over the same period, outstanding deposits
rose +2.9%*. Up +11.7%* in 2012, revenues grew in all the division's entities,
where Morocco and Tunisia benefited from a positive volume effect and Algeria
from strong activity related to foreign trade. Operating expenses rose +18.4%*
in line with the network's expansion. The contribution to Group net income came
to EUR 186 million in 2012. It is worth noting that the earnings of NSGB (Egypt)
will continue to be included in those of International Retail Banking until the
actual disposal of the entity (which is expected to be finalised at the end of
Q1 13), whereas the associated assets and liabilities are isolated on specific
lines of the consolidated balance sheet at December 31st, 2012, in accordance
with current accounting standards.
In Sub-Saharan Africa, the franchise continued to enjoy strong growth, with 21
additional branches (+8.3%). Outstanding loans rose +4.5%* in 2012, with
particularly robust growth for individual customers (+22.5%*), while deposits
rose +6.6%*. In line with this momentum, revenues were up +11.3%* vs. 2011,
while the increase in operating expenses (+9.2%* over the same period) reflects
the expansion of the network. The contribution to Group net income came to EUR
37 million in 2012.
4. CORPORATE AND INVESTMENT BANKING
---------------------------------------
| --------- -------
In EUR m | 2011 2012 Change Q4 11 Q4 12 Change
| 2012 vs. 2011 Q4 vs. Q4
-------------------+------------------------------------------------------------
Net banking income | 5,980 6,189 +3.5% 655 1,460 x2.2
|
On a like-for-like| +1.1% x 2,2
basis*|
-------------------+------------------------------------------------------------
Financing and | 2,315 1,582 -31.7% 403 436 +8.2%
Advisory |
-------------------+------------------------------------------------------------
On a like-for-like| -31.5% +6.3%
basis*|
-------------------+------------------------------------------------------------
Global Markets (1) | 4,141 4,875 +17.7% 776 1,029 +32.6%
-------------------+------------------------------------------------------------
On a like-for-like| +14.0% +31.4%
basis*|
-------------------+------------------------------------------------------------
Legacy assets | (476) (268) +43.7% (524) (5) +99.0%
-------------------+------------------------------------------------------------
Operating expenses |(4,748) (4,189) -11.8% (1,299) (957) -26.3%
|
On a like-for-like| -13.1% -27.7%
basis*|
-------------------+------------------------------------------------------------
Gross operating | 1,232 2,000 +62.3% (644) 503 NM
income |
|
On a like-for-like| +54.1% NM
basis*|
-------------------+------------------------------------------------------------
Net cost of risk | (563) (630) +11.9% (94) (196) x2.1
-------------------+------------------------------------------------------------
O.w. Legacy assets | (425) (262) -38.4% (81) (95) +17.3%
-------------------+------------------------------------------------------------
Operating income | 669 1,370 x2.0 (738) 307 NM
|
On a like-for-like| +86.6% NM
basis*|
-------------------+------------------------------------------------------------
Group net income | 635 1,053 +65.8% (482) 249 NM
-------------------+------------------------------------------------------------
(1) O.w. "Equities" EUR 2,085m in 2012 (EUR 2,379m in 2011) and "Fixed income,
Currencies and Commodities" EUR 2,790m in 2012 (EUR 1,762m in 2011)
After the serious euro zone crisis in H2 2011, economic conditions remained
challenging in 2012: the markets experienced successive periods where investors
adopted a "wait-and-see attitude" followed by a renewed risk appetite. Against
this backdrop, Corporate and Investment Banking continued with its
transformation towards a client-focused business model, with a risk profile
under control and limited consumption of scarce resources, while at the same
time producing solid results.
The revenues of core activities were up +4.9% year-on-year at EUR 6,946 million
(excluding the net discount on loans sold which amounted to EUR -489 million).
Global Markets revenues jumped +17.7% vs. 2011 to EUR 4,875 million. At the same
time, market risk exposure remained at a low level (the average VaR in 2012 was
lower than in 2011 at
EUR 31 million vs. EUR 38 million in 2011).
Equity activities posted revenues down -12.4% vs. 2011 at EUR 2,085 million in a
market characterised by low volumes throughout the year, particularly in Europe.
Given the market conditions, the Equity business line's performance demonstrates
the competitiveness and solidity of its franchise both for flow products and
structured products. In 2012, SG CIB was voted "Most Innovative Investment Bank
for Equity Derivatives" (The Banker, October 2012). It was also named "Equity
Derivatives House of the Year" (Risk awards 2013 and IFR awards 2012). The bank
has retained leading positions in the warrants (global No. 1 with a 12.6% market
share in 2012) and ETF markets (European No. 3). Lyxor's expertise, especially
in alternative investment and index management, was once again recognised since
its managed account platform received awards on several occasions in 2012,
notably for "Best Managed Account Platform" (Hedgeweek, June 2012 and Hedge
Funds Review, October 2012). Lyxor's assets under management increased in 2012,
from
EUR 73.6 billion to EUR 75.4 billion.
Fixed Income, Currencies & Commodities posted sharply higher revenues (up +58%
vs. 2011 at EUR 2,790 million), benefiting from a more favourable market
environment and its dynamic franchise. Accordingly, credit, rates and structured
product activities posted higher revenues than in 2011. In 2012, SG CIB
distinguished itself by being ranked 2nd most active Primary Dealer in French
government securities (Agence France Trésor, January 2013). SG CIB was also
ranked No. 1 in the "Euromoney Fixed Income Investors Survey" in the categories
"Overall Trade Ideas" and "Overall Credit Strategy".
Financing & Advisory posted revenues of EUR 1,582 million, marked by the
negative impact of the loan disposal programme (EUR 10 billion of loans sold in
2012, for a net discount of EUR -489 million, after EUR 6 billion of loans sold
in 2011 for a net discount of EUR -163 million). Excluding the net discount on
loans sold, revenues totalled EUR 2,071 million, representing a decline over the
year of
-16.4%, in the wake notably of business refocusing. Structured financing
activities were resilient in 2012 thanks to natural resources, export and
infrastructure financing. Capital market activities posted mixed results, with a
good performance for bond issuance whereas equity issuance was hit by low
volumes. SG CIB participated in a number of emblematic transactions in 2012,
such as the project bond issue for Dolphin Energy, the financing of the spin-off
of SNAM (Società Nazionale Metanodotti) from ENI (Ente Nazionale Idrocarburi) or
the financing of a refinery in Cairo for the Egyptian Refining Company. As in
2011, SG CIB was named "Best Export Finance Arranger" and "Best
Commodity
Finance Bank" by Trade Finance Magazine in June 2012. Finally, SG CIB has
retained its position in the debt and equity markets: No. 5 in Euro bond
issuance, No. 2 in Euro corporate bond issuance and No. 2 in equity and equity
linked issuance in France (Thomson Reuters - IFR).
Lastly, the Group continued with its policy of legacy asset sales in 2012, with
a reduction in nominal of EUR -10.5 billion over the year (EUR -8.2 billion of
disposals and EUR -2.4 billion of amortisation). Legacy assets' net banking
income came to EUR -268 million (vs. EUR -476 million in 2011).
Operating expenses were significantly lower in 2012, providing further evidence
of the effect of the restructuring and cost adjustment plans introduced at end-
2011. When restated for the restructuring charge recorded in Q4 11 (EUR -215
million) and the French systemic tax allocation booked in
Q4 12 (EUR -50 million), operating expenses were down -8.7%. Core activities'
cost to income ratio stood at 59.2% in 2012, excluding the net discount on loans
sold.
The cost of risk of Corporate and Investment Banking's core activities remained
low in 2012
(31 basis points vs. 11 basis points in 2011) demonstrating the quality of its
portfolio. Legacy assets' net cost of risk was down over the period at EUR -262
million in 2012 (EUR -425 million in 2011).
In 2012, Corporate and Investment Banking's core activities, excluding the net
discount on loans sold, made a contribution to Group net income of EUR 355
million in Q4 and EUR 1,807 million for the year (vs. respectively EUR 62
million and EUR 1,422 million in 2011).
The division's Q4 revenues amounted to EUR 1,460 million. Operating expenses
came to EUR 957 million. The contribution to Group net income totalled EUR
249 million in Q4 12 (vs. EUR -482 million in Q4 11).
The division's total contribution to Group net income amounted to EUR 1,053
million for the year
(EUR 635 million in 2011).
4. SPECIALISED FINANCIAL SERVICES AND INSURANCE
---------------------------------------------------
| --------- -------
In EUR m | 2011 2012 Change Q4 11 Q4 12 Change
| 2012 vs. 2011 Q4 vs. Q4
-------------------------+---------------------------------------------------
Net banking income | 3,443 3,489 +1.3% 849 894 +5.3%
|
On a like-for-like basis*| +1.4% +5.1%
-------------------------+---------------------------------------------------
Operating expenses |(1,846) (1,844) -0.1% (470) (488) +3.8%
|
On a like-for-like basis*| +0.3% +4.8%
-------------------------+---------------------------------------------------
Gross operating income | 1,597 1,645 +3.0% 379 406 +7.1%
|
On a like-for-like basis*| +2.6% +5.5%
-------------------------+---------------------------------------------------
Net cost of risk | (829) (687) -17.1% (213) (175) -17.8%
-------------------------+---------------------------------------------------
Operating income | 768 958 +24.7% 166 231 +39.2%
|
On a like-for-like basis*| +23.8% +36.9%
-------------------------+---------------------------------------------------
Group net income | 297 674 x2.3 73 165 x2.3
-------------------------+---------------------------------------------------
N.B.: 2011 Group net income includes a EUR -250m goodwill write-down
The Specialised Financial Services and Insurance division comprises:
i. Specialised Financial Services (operational vehicle leasing and fleet
management, equipment finance, consumer finance),
ii. Insurance (Life, Personal Protection, Property and Casualty).
In a constrained environment, Specialised Financial Services and Insurance
posted solid results in 2012, with EUR 674 million vs. EUR 547((2)) million in
2011, while at the same time optimising its business model. These significantly
higher results were achieved against the backdrop of a decline in the division's
risk-weighted assets (-3.9%* vs. end-2011).
The division successfully carried out various external refinancing operations
throughout the year, (securitisation of car loans in France and Germany, launch
of a deposit collection activity in Germany). As a result, a total of EUR 4.2
billion was raised in 2012.
Operational vehicle leasing and fleet management continued with the monitored
growth of its fleet in 2012, which amounted to more than 955,000 vehicles at
end-December (+4.2%(1) vs. end-December 2011). ALD Automotive consolidated its
position as the European leader, notably via the development of partnership
agreements with car manufacturers or banking networks.
Against a backdrop of selective development, new Equipment Finance business
amounted to
EUR 7.0 billion (excluding factoring) in 2012, down -11.1%* vs. 2011. New
business margins remained at a high level. At end-December 2012, outstanding
loans totalled EUR 17.8 billion (excluding factoring), down -5.2%* vs. end-
December 2011. The business line strengthened its position in its key markets
and obtained the recognition of its peers ("European Lessor of the
Year" and "SME Champion of the Year", Leasing Life Awards), while at the
same
time adapting its operating model, in particular by increasing its external
financing.
In a fragile economic environment, new Consumer Finance business amounted to EUR
10.1 billion in 2012, down -3.7%* vs. 2011. Outstandings totalled EUR 21.9
billion, a decline of -2.7%* year-on-year. The business line continued with its
refocusing and the optimisation of its international network through the
disposal of its activities in Bulgaria, Ukraine and India. This refocusing,
combined with enhanced cost and risk control, enabled the business line to
generate a profit in 2012.
Specialised Financial Services' net banking income was slightly lower in 2012 (-
1.0%* at
EUR 2,805 million). At EUR 1,585 million in 2012, operating expenses improved by
-1.0%* vs. 2011. The net cost of risk fell substantially in 2012 to EUR -687
million (125 basis points) vs.
EUR -829 million (149 basis points). Operating income came to EUR 533 million,
up +32.3%* vs. 2011.
Specialised Financial Services' revenues amounted to EUR 715 million in Q4 12,
up +2.4%* vs.
Q4 11, whereas operating expenses totalled EUR -420 million, up +4.3%*. Q4
operating income rose +50.5%* to EUR 120 million, with a cost of risk down
-19.2%*.
Insurance activity posted good performances in 2012 despite a deteriorated
environment. Net life insurance inflow was EUR 70 million and outstandings
amounted to EUR 79.6 billion at
end-December 2012 (+4.2%* vs. end-December 2011). Personal Protection and
Property/Casualty insurance remained dynamic inside and outside France, with
continued growth in the insurance product penetration rate with retail banking
customers and the launch of new activities (additional health insurance in
France, car insurance in Russia). The premiums on these activities grew by
respectively +23.0%* and +9.3%* vs. 2011 (+22.6%* and +8.2%* respectively vs. Q4
11).
Insurance revenues totalled EUR 684 million in 2012, up +12.5%* vs. 2011. They
amounted to
EUR 179 million in Q4 12, up +17.8%* vs. Q4 11.
4. PRIVate banking, GLOBAL INVESTMENT MANAGEMENT AND SERVICES
-----------------------------------------------------------------
| --------- -------
In EUR m | 2011 2012 Change Q4 11 Q4 12 Change
| 2012 vs. 2011 Q4 vs. Q4
----------------------------+---------------------------------------------------
Net banking income | 2,169 2,160 -0.4% 500 553 +10.6%
|
On a like-for-like basis*| -2.8% +9.0%
----------------------------+---------------------------------------------------
Operating expenses |(1,967) (1,905) -3.2% (498) (486) -2.4%
|
On a like-for-like basis*| -5.6% -3.8%
----------------------------+---------------------------------------------------
Operating income | 189 245 +29.6% 13 66 x5.1
|
On a like-for-like basis*| +27.7% x 4,4
----------------------------+---------------------------------------------------
Impairment losses on | (65) (580) NM (65) (380) NM
goodwill |
----------------------------+---------------------------------------------------
Group net income | 171 (293) NM (45) (308) NM
----------------------------+---------------------------------------------------
o.w. Private Banking | 115 93 -19.1% 13 27 x2.1
----------------------------+---------------------------------------------------
o.w. Asset Management | 99 (58) NM 18 34 +88.9%
----------------------------+---------------------------------------------------
o.w. SG SS & Brokers | (43) (328) NM (76) (369) NM
----------------------------+---------------------------------------------------
Private Banking, Global Investment Management and Services consists of four
activities:
(i) Private Banking (Societe Generale Private Banking)
(ii) Asset Management (Amundi and TCW)
(iii) Societe Generale Securities Services (SGSS)
(iv) Brokers (Newedge).
In 2012, Private Banking, Global Investment Management and Services strengthened
its commercial positions and saw its contribution to Group net income increase
significantly by +21.6% vs. 2011 (excluding the goodwill write-down on TCW and
Newedge) to EUR 287 million.
The macroeconomic environment remained durably marked by weak markets and low
interest rates as well as the cautious stance of both private and institutional
investors. At EUR 2,160 million, revenues experienced a limited decline of
-2.8%* year-on-year (stable in absolute terms). As for operating expenses, at
EUR 1,905 million, they continued to benefit from operating efficiency efforts
and fell -5.6%*. As a result, gross operating income was 24.5%* higher than in
2011 at
EUR 255 million in 2012.
In Q4 12, the division posted revenues up +9.0%* vs. Q4 11 at EUR 553 million,
whereas operating expenses were down -3.8%* at EUR 486 million. As a result,
gross operating income rebounded from EUR 2 million in Q4 11 to EUR 67 million
in Q4 12. If goodwill write-down is stripped out, the division's contribution to
Group net income amounted to EUR 72 million vs. EUR 20 million in Q4 11.
Private Banking
In 2012, Private Banking consolidated its franchise despite market uncertainty
and the cautious stance of investors. Assets under management totalled EUR 86.1
billion at end-December 2012, up +1.5% year-on-year. This includes an inflow of
EUR +1.0 billion, a "market" effect of EUR +2.6 billion, a "currency"
impact of
EUR -0.4 billion and a "structure" effect of EUR -2.0 billion.
Against a backdrop of deleveraging, partially offset by margins holding up well,
the business line's revenues fell -2.4%* vs. 2011 to EUR 757 million. Operating
expenses declined by -1.3%* to EUR 624 million on the back of cost-saving
measures.
Gross operating income totalled EUR 133 million in 2012 (vs. EUR 143 million in
2011). The business line's contribution to Group net income amounted to EUR 93
million vs. EUR 115 million in 2011.
Q4 revenues came to EUR 202 million, up +26.7%* vs. Q4 11. At EUR 162 million,
operating expenses were 6.7%* higher due to transformation costs and the
reallocation of the systemic tax to the businesses. Gross operating income
amounted to EUR 40 million and the contribution to Group net income was EUR 27
million.
The magazine Euromoney awarded Societe Generale the titles, for 2012, of "Best
Private Bank" in France (for the second time in three years), "Best Private Bank
in Monaco", as well as "Best Private Bank in Western Europe for its offer in
structured products" for the ninth year running. These awards supplement those
obtained as "Best Private Bank in Luxembourg" and in the "Middle
East"
(respectively by PWM/The Banker and by The Banker Middle East, for 2012).
Asset Management
TCW posted a significant inflow of EUR 3.5 billion in 2012, up +52.2% vs. 2011.
After taking into account a "market" effect of EUR +9.4 billion, a
"currency"
impact of EUR -0.1 billion and a "structure" effect of EUR +2.7 billion, assets
under management totalled EUR 106.6 billion at end-December 2012 (vs. EUR 91
billion at end-December 2011).
Revenues and operating expenses fell in 2012 by respectively -8.6%* to EUR 338
million and by
-21.0%* to EUR 289 million due to a change in accounting method with no effect
on operating income. Operating expenses were also impacted by the settlement of
a commercial litigation issue in 2011.
Gross operating income was sharply higher at EUR 49 million in 2012 vs. EUR 2
million in 2011.
Amundi's contribution was EUR 115 million in 2012, vs. EUR 98 million in 2011.
Q4 revenues came to EUR 88 million, down -16.2%* vs. Q4 11. Operating expenses
fell -27.5%* to EUR 74 million. As a result, gross operating income totalled EUR
14 million (EUR 3 million in Q4 11). The contribution to Group net income was
EUR 34 million (vs. EUR 18 million in Q4 11), including a Q4 contribution from
Amundi of EUR 28 million based on the equity method.
Societe Generale Securities Services (SGSS) and Brokers (Newedge)
In 2012, Securities Services demonstrated a healthy commercial momentum with the
signing, at the end of the year, of new mandates with Swiss Life AM, Allianz GIF
and Aberdeen AM. Assets under custody and assets under administration rose by
respectively +3.6% to EUR 3,449 billion and +10.4% to EUR 456 billion.
Despite overall market volume declining, Newedge increased its market share to
11.8% in 2012
(vs. 11.5% at end-2011).
Securities Services and Brokers posted slightly lower revenues in 2012 (-1.1%*
at EUR 1,065 million). These businesses saw their operating expenses decline by
a further -2.7%* in 2012 vs. 2011 to
EUR 992 million, due to ongoing operating efficiency measures. Gross operating
income was higher at EUR 73 million (vs. EUR 57 million in 2011) and the
business line's contribution to Group net income rose to EUR 52 million
(excluding goodwill write-down) vs. EUR 22 million in 2011.
Q4 revenues came to EUR 263 million, up +8.3%*. At EUR 250 million, operating
expenses were close to their level in Q4 11. Gross operating income totalled EUR
13 million and the contribution to Group net income was EUR 11 million
(excluding goodwill write-down).
4. CORPORATE CENTRE
------------------------
The Corporate Centre's revenues totalled EUR -1,832 million in 2012 (vs. EUR
862 million in 2011). Revenues amounted to EUR -1,073 million in Q4 12 vs. EUR
613 million in Q4 11. They include, in particular:
* the revaluation of the Group's own financial liabilities, amounting to EUR
-1,255 million, including EUR -686 million in Q4 12 (vs. a total impact of
EUR +1,177 million in 2011, including EUR +700 million in Q4);
* the revaluation of credit derivative instruments used to hedge corporate
loan portfolios, amounting to EUR -56 million in 2012 (EUR +66 million in
2011), including EUR -26 million in Q4 12 (EUR +28 million in Q4 11);
In Q4 12, the total amount for 2012 of the so-called "systemic" French banking
tax was allocated to the businesses. This restatement had a positive impact on
the Corporate Centre's operating expenses of EUR +103 million in Q4. Operating
expenses totalled EUR -159 million in 2012, vs. EUR -239 million in 2011,
virtually stable when restated for the French systemic tax recorded in the
Corporate Centre in 2011 amounting to EUR -67 million.
The 2012 net cost of risk includes a EUR -300 million provision for litigation
issues and an additional expense in respect of Greek sovereign risk (EUR -22
million vs. EUR -890 million in 2011).
Lastly, the Corporate Centre incurred EUR -509 million of net gains or losses on
other assets, including EUR -375 million for Geniki and EUR -86 million for TCW.
4. CONCLUSION
-----------------
The Group's transformation is reflected in substantial structural changes
(review of the Group's financing model, refocusing of businesses, asset
disposals), as well as measures to control costs and rigorously manage scarce
resources and risks. These initiatives enable Societe Generale to continue to
develop its business as a universal bank, committed to its customers and
capitalising on its leadership positions.
With underlying Group net income of EUR 3.4 billion and an increase in the Core
Tier 1 ratio (calculated according to "Basel 2.5
