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Investors have responded to the first strategic plan by new Société Générale’s chief executive Slawomir Krupa by sending the French bank’s shares down 12.6 per cent on Monday.
Under the three-year strategy unveiled on Monday morning, Krupa cut profitability targets for the lender and forecast slower growth in what he called a “realistic” new plan after years of restructurings.
“I’m pleasing no one,” he told the Financial Times after analysts asked whether he was being too bearish.
Krupa, who was installed as chief executive in May in SocGen’s first change of CEO for 15 years, said the bank would target a return on tangible equity of between 9 and 10 per cent by 2026. That compared to a previous target of a 10 per cent return by 2025.
France’s third-biggest bank by market value will also aim for annual revenue growth of between zero and 2 per cent on average between 2022 and 2026, lower than its previous target of 3 per cent growth by 2025.
“It’s a realistic path, in which promises are less important than our ability to deliver them,” Krupa told reporters. “This is the right plan for the bank.”
He added that SocGen would be disciplined about capital, limiting how much it allocates to its range of businesses, and outlined cost savings and moves to simplify the bank’s structure.
Jefferies analyst Flora Bocahut said she was “negatively surprised by [the] lack of revenue growth, increased capital target, payout and [return on tangible equity] cut, and by the lack of details”.
Asked by the FT about the share sell-off, Krupa said: “Today’s strategy is not about today,” adding that it was about showing the bank’s stability in the long term.
The bank went through a number of restructurings under previous chief executive Frédéric Oudéa, while its share price has continued to underperform peers since a 2008 rogue trading scandal and the global financial crisis.
“We believe this is a credible plan that can start the stock’s re-rating,” said Citi analyst Azzurra Guelfi.
Krupa said SocGen would try to slim down its operations and form strategic partnerships with other financial groups to reduce its cost base, but it did not give more details on which units could be sold or trimmed down.
Krupa, who established himself as a viable successor to Oudéa through a five-year stint as head of the bank’s US business, has already set up partnerships with large US financial groups.
Last week, SocGen announced a €10bn private credit fund with Brookfield Asset Management. The bank has also formed an equities joint venture with AllianceBernstein.
Krupa said on Monday that alliances could be agreed in other parts of SocGen’s businesses. The bank would have to be “inventive” in its search for growth, he added, as it became more conservative about where it allocates capital outside its French online bank Boursorama and its car-leasing operations.
It has already pulled back on risk taking at its investment bank in recent years, and Krupa said he wanted to build up the deals advisory side of the business.
SocGen also said on Monday that it would aim to cut its cost-to-income ratio to below 60 per cent by 2026, involving €1.7bn of savings.
It outlined a goal to have a tier one capital ratio of 13 per cent, in line with tougher regulatory requirements, and it outlined a dividend payout ratio of between 40 and 50 per cent of profits from this year, a lower target than domestic rivals.
Monday’s market moves mean SocGen shares are down 3 per cent this year, compared with a 10.8 per cent gain for the wider European bank sector.
Before the plan was unveiled, the bank’s shares had risen 34 per cent since late March when investors worried about the fallout of the rescue of Credit Suisse on the European banking system.
SocGen is one of the cheapest large banks in Europe, with a price to tangible book value of 0.3, less than half that of French rival BNP Paribas.
