French bank Societe Generale said on Wednesday it would return more cash to shareholders in 2014, after a swing to a fourth-quarter profit capped a long-running push to boost the strength of its balance sheet.
France's No. 2 listed bank has sold assets, cut jobs and pulled out of markets like Greece and Egypt as European lenders race to boost their closely watched capital ratios after the financial crisis and the euro zone's debt woes.
With a core Tier 1 capital ratio of 10 percent at end-December under tougher Basel III rules, ahead of some rivals like Deutsche Bank, the bank is targeting a dividend payout ratio of 40 percent in 2014, up from 27 percent in 2013, SocGen's chief executive told Reuters Insider television.
"We have accomplished the transformation of the balance sheet at year-end 2013," Oudea said, adding the bank was able to grow operating income, to benefit from a reduction in loan-loss provisions and to use capital more effectively.
SocGen may also consider "small" acquisitions that fit into its business model, SocGen's CEO said, in the mould of the derivatives-focused broker Newedge it agreed to take over last year. SocGen's loan-loss provisions are expected to fall progressively, according to Oudea.
"The results are reassuring but the key point is the increase in the dividend payout," said Yohan Salleron, fund manager at Mandarine Gestion. "This is a trend that will start to be seen across the banking sector."
Net profit almost triples
SocGen reported a fourth-quarter net profit of 322 million euros ($440 million), compared with a 471 million loss for the same period in 2012. Loan-loss provisions were down by 20 percent, while writedowns on the acquisition value of assets were cut by almost 90 percent.
Stripping out one-off costs and losses on toxic assets, SocGen's fourth-quarter net income would have been 928 million euros, the bank said, thanks to profit growth from retail banking in France and abroad as well as corporate finance.
That compared with quarterly analyst expectations for a figure closer to 623.3 million euros, according to the mean average of analyst forecasts compiled by Thomson Reuters Eikon.
Its shares rose 2.6 percent, to 45.40 euros, at 0801 GMT, the second-best performer on the STOXX Europe 600 banks index .
"There's nothing not to like in SocGen," said Toby Campbell-Gray, head of trading at Tavira Securities.
On an annual basis, SocGen's 2013 net profit almost tripled to 2.18 billion euros from 790 million euros a year earlier. The bank said it would pay a 2013 dividend of 1 euro per share, up from 0.45 euros in 2012.
Meanwhile, Dutch bank ING reported underlying net profit of 3.255 billion euros ($4.45 billion) for 2013, 22 percent better than its 2012 performance and ahead of analysts' expectations.
SocGen has launched a new drive to cut costs to try to meet its end-2015 return-on-equity target of 10 percent. The bank secured 350 million euros in recurring cost savings in 2013, part of which will come from hundreds of job cuts.
Rivals including Deutsche Bank and UBS are targeting ROEs in 2015-2016 of 12 to 15 percent but SocGen's Oudea said there was no plan to increase his target.
Although SocGen's bill for one-off charges was lighter overall than a year ago, SocGen booked a previously announced 445.9 million euro fine following attempts by an employee to manipulate the Euribor rate from March 2006 to May 2008.
The fine wiped out investment-banking profits for the fourth quarter, despite a strong revenue performance for equities trading - a revenue jump of over 90 percent - that offset a fixed-income revenue drop.
SocGen's Oudea told Reuters the bonus pool for 2013 would be down from 2012 as a result and said SocGen had a good risk culture and had learned its lesson from the crisis. ($1 = 0.7312 euros)