Société Générale: A Hidden Gem in European Finance, Backed by BofA's Bullish Call

The European banking sector has long been a battleground of undervaluation and skepticism, but Société Générale (SOGN.PA) is emerging as a standout candidate for revival. With Bank of America (BofA) recently upgrading its price target to €58 from €52—a 12% increase—and maintaining a "buy" rating—the stock has gained traction as a top pick for 2025. This analysis explores why Société Générale's valuation discount, strategic buybacks, and operational efficiency could position it for a meaningful rebound, backed by one of Wall Street's most influential banks.

Valuation Discount: A Catalyst for Upside

Société Générale's shares currently trade at a 30% discount to tangible book value (TBV), a stark contrast to its European peers like UniCredit (CRDI.MI) or BNP Paribas (BNP.PA), which trade closer to book value. BofA argues this discount is irrational, citing the bank's robust capital position and disciplined strategy. The firm's CET1 ratio—a key measure of financial strength—stands at 13.6%, well above regulatory requirements, offering ample room for capital returns.

The undervaluation presents a rare opportunity. BofA estimates that share buybacks—€1 billion planned for 2025—could unlock a 30%-40% return on capital over three years, directly narrowing the valuation gap. This aligns with the bank's strategic focus on capital efficiency, which CEO Slawomir Krupa has prioritized since 2024.

The Buyback Play: Fueling Shareholder Returns

BofA's bullish stance hinges on two key catalysts for 2025:
1. €1 Billion Buyback Program: Société Générale's repurchase plan, announced in Q2, aims to reduce shares outstanding by ~2%, boosting per-share metrics. With shares trading at a deep discount, this initiative could amplify earnings accretion and send a strong signal to investors.
2. Cost Efficiency and Revenue Growth: The bank's Q1 2025 results showed a cost-to-income ratio of 54%, down from 56% a year ago, while net interest income rose 8%. Analysts expect further margin improvements in H2, driven by rising rates and stronger corporate lending.

These factors, combined with BofA's upgraded price target, suggest the stock could climb from its current price of ~€45 to €58—a 29% upside—over the next 12 months.

Navigating the Risks

While the thesis is compelling, risks linger. Société Générale's valuation discount persists despite its strong fundamentals, partly due to legacy issues like loss-making hedges in its French retail division and investor wariness toward European banks in general. A Reuters Breakingviews analysis even suggested a strategic breakup of subsidiaries like Ayvens and Komercni Banka could unlock trapped value. However, such drastic measures are politically and logistically complex, making BofA's near-term focus on buybacks and operational execution more realistic.

Investment Thesis: Buy the Dip, Hold for the Long Game

The data paints a clear picture: Société Générale is undervalued, well capitalized, and executing on its turnaround plan. BofA's upgraded target and inclusion on its "25 stocks for 2025" list underscore institutional confidence. Investors should:
- Take a position now at ~€45, aiming for the €58 target.
- Monitor Q3 2025 results, where earnings could push the stock higher if margin improvements and buybacks meet expectations.
- Consider a long-term horizon, as the bank's TBV discount and capital flexibility suggest further upside over 3–5 years.

Conclusion

Société Générale is a prime example of how undervalued European financials can thrive with strategic capital allocation and operational rigor. Backed by BofA's conviction and its own execution, the stock offers a compelling risk-reward profile. For investors seeking exposure to a turnaround story with tangible catalysts, Société Générale deserves serious consideration. The path to €58—or beyond—appears clear, but the key is to act before the market catches up.

Final rating: Buy. Target price: €58. Risk level: Moderate.