SocGen Signals Shift to Higher Payouts as Profit Beats Estimate

Societe Generale (SocGen), France's third-largest listed lender, has announced a significant increase in its payout ratio to 50% of net income, following a strong performance in 2024 that saw its net income group share more than double year-on-year. The bank's decision to raise its distribution to shareholders comes as it exceeded analyst estimates for the fourth quarter of 2024, driven by a rebound in its retail banking activities in France and an excellent performance in its investment bank division.

The bank reported a net income group share of EUR 1.04 billion for the fourth quarter of 2024, up 142.07% compared to the previous year's EUR 420 million. This strong performance was supported by a 11.1% increase in net banking income to EUR 6.62 billion, which exceeded the average analyst estimate of EUR 6.41 billion. The investment bank division contributed significantly to the group's earnings, with revenues above EUR 10 billion, driven by an excellent performance in equity trading and a rebound in the net interest margin in France.

SocGen's cost-to-income ratio for the fourth quarter of 2024 was 69.4%, compared to 78.3% in the same period a year earlier. This improvement was achieved through tight control of costs, which remained stable compared to 2023. The bank's cost of risk was at 26 basis points, at the lower end of the 2024 guidance range, indicating better risk management and a lower level of defaults or impairments.

The bank's strong performance in 2024 enabled it to post a net income group share of EUR 4.2 billion, up 69% year-on-year, and net banking income of EUR 26.8 billion, up 6.7% year-on-year, both ahead of target. As a result, SocGen is proposing a distribution of EUR 1.74 billion, equivalent to EUR 2.18 per share, composed of a cash dividend of EUR 1.09 per share and a share buyback program of EUR 872 million, equivalent to EUR 1.09 per share. The ECB's authorization has been obtained to launch this program, which will start on 10 February 2025.

SocGen's increased payout ratio is a positive sign for shareholders, as it indicates that the bank is distributing a larger portion of its profits as dividends or share buybacks. This shift in policy is a reflection of the bank's strong capital position, with a CET1 ratio of 13.3% at the end of 2024, around 310 basis points above the regulatory requirement. The bank's improved profitability, strong capital build-up, and focus on cost control and risk management have all contributed to this positive development.

In conclusion, SocGen's strong performance in 2024, driven by a rebound in its retail banking activities in France and an excellent performance in its investment bank division, has enabled the bank to exceed analyst estimates and increase its payout ratio to 50% of net income. This shift in policy is a positive sign for shareholders, as it indicates that the bank is distributing a larger portion of its profits as dividends or share buybacks. The bank's strong capital position and improved profitability have all contributed to this positive development, and SocGen is well-positioned to continue its strong performance in 2025.