SOCIETE Generale, France’s third-biggest listed bank, reported better-than-expected quarterly earnings on Thursday, as cost management and a strong growth of its car leasing division alleviated a steep fall in margins at its retail branch.

SocGen reported a 900 million-euro (S$1.32 billion) group net income for the three months-period ending in June, above the average analyst estimate compiled by the company of 670 million euros.

The beat was also underpinned by lower-than-expected “cost of risk” – money set aside for failing loans – of 166 million euros in the second quarter, while the markets expected more than twice that figure, or 430 million euros.

“The cost of risk was very low, reflecting the quality of our origination and our loan portfolio,” said chief executive Slawomir Krupa, who was unveiling his first quarterly results in his new role.

The bank, which confirmed its full-year objectives, didn’t mention longer-term targets, as all eyes are now set on Sept 18, when Krupa and his new executive team will present a strategic plan.

It will be a key test for the company veteran, tasked to revive the bank’s stock after years of lackluster performance and a painful exit from Russia that made the French lender appear vulnerable in the latest banking turmoil.

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Dubbed a “year of transition” by Krupa’s predecessor Frederic Oudea, 2023 is notably marked by a severe downturn at SocGen’s French retail banking division, fresh off a merger of its two local networks.

The division reported a 14% fall in revenues in the second quarter, contributing to worse-than-expected group sales of 6.29 billion euros, down 8.9% from a year earlier.

France’s stringent mortgage rules, marked by caps on lending rates, weigh on banks’ margins. Rates on the most popular savings account, Livret A, are set by the government, further biting the lenders’ profitability.

The phasing out of a cheap long-term loan programme by the European Central Bank also adds an extra burden. SocGen’s second-quarter net income almost halved from a year earlier, it said.

The retail branch’s woes came on top of a slowdown of its investment bank unit in the quarter, as its profitable trading business was affected by a less volatile environment.

Revenue from trading in fixed income and currency sinked by 18.4 per cent in the second-quarter, while its equivalent for equities retreated by 5.8 per cent.

Retail banking outside France fared better, as did SocGen’s expanded car leasing division ALD Automotive, whose sales jumped by more than 17 per cent thanks to the acquisition of rival LeasePlan, which makes the listed group the biggest in the field in Europe. REUTERS