Société Générale Société anonyme (GLE) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Société Générale Third Quarter 2026 Results Conference Call. I will now hand over to Mr. Slavomir Krupa, Chief Executive Officer. Sir, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today. Leo and I are very happy to present our results for the third quarter and the first 9 months of the year. All organizations today operate in a complex and highly uncertain environment. But despite that, our strong momentum continues to accelerate. And today, we are announcing a record group net income for both the quarter and the first 9 months of the year. Our accretive growth translates into a strong profitability with a ROTE of 12.3% over the first 9 months of the year compared to 10.5% last year. It is also significantly above our end of year target of around 11%. And specifically, our revenues are up by 4.1% versus 9 months '25 on a reported basis. This is more than twice our 2026 guidance. We remain disciplined on costs, with operating expenses down 3.2% versus 9 months '25 despite the much higher pace of revenue growth. And this translates into a cost-to-income ratio of 58.8%, which is much better than our year-end target of a cost-to-income ratio below 60%. With a cost of risk of 27 basis points, we remain in the middle of our guidance range, indicating both our prudent risk management and the strong quality of our credit portfolio. Again, all of this has substantially improved profitability with a ROTE of 12.3% in the first 9 months of 2026. Ultimately, our capital position remains high with the CET1 ratio standing at 13.4% after taking into account the completed extraordinary share buyback of EUR 1.5 million. So now let me hand over to Leo, who will take you through our Q3 '26 financial performance. Leo?

Thank you, Slavomir, and good morning, everyone. Moving on now to our financial performance for the quarter. Overall, Q3 '26 is another strong set of results. Our revenues are strongly increasing by 7.8% versus Q3 '25 notably on the back of a continued solid momentum in French Retail Banking as well as in Global Banking and Investor Solutions, as we will see later. At constant perimeter and exchange rates, the revenue growth stands at 8.4% versus Q3 '25. Thanks to our continued cost discipline, which increased by only 0.8% this quarter, despite provisioning for the increase in variable compensation linked to the strong evolution of revenues, we delivered a significant positive jaws expansion of 7 percentage points. This results in further strengthening our operational leverage and the cost income ratio of 57.1% in Q3, down by around 4 percentage points versus Q3 '25. From an asset quality perspective, the cost of risk remains well contained at 28 basis points, this is within the 25 to 30 basis points guidance range. The quarterly net income reached a record high EUR 1.9 billion, and our ROTE stands at 13%, a strong improvement versus Q3 '25 level of 10.7%. The next slide highlights the key drivers behind our revenue growth in Q3. As previously stated, the group recorded a strong increase in reported revenues by 7.8%. The first item of the bridge reflects the impact of disposals with an overall effect of minus EUR 48 million, lower than previous quarters anticipated. The impact is mainly related to the disposals of the activities in Cameroon and Equatorial Guinea. At constant perimeter and exchange rates, the increase is even higher reaching 8.4% versus Q3 '25. Business-wise, revenues in French Retail, Private Banking and Insurance showed a strong momentum with a growth of 10.9% on a reported basis. [indiscernible] is supported by high NII, which grew 12.7%. Revenues at Global Banking & Investor Solutions increased by 12.5% versus Q3 '25 or 11.8% at constant perimeter and exchange rates, supported by a record performance in equities. On the other hand, revenues in mobility, International Retail Banking and Financial Services decreased by 4.3% this quarter at constant perimeter and exchange rates as revenues at Ayvens declined driven by lower used car sales results, which continued to normalize as guided. To conclude with Corporate Center, revenues improved by EUR 94 million, driven by revaluation effects. On the following slide, we can see the main drivers of cost development in Q3. In detail, our costs are moderately up by 0.8% versus Q3 '25 on a reported basis and by 1.1% at constant perimeter and exchange rates. The slight increase is primarily driven by higher cost on GBIS level, driven, of course, by the growing variable compensation, which reflects a stronger-than-expected financial performance. The remaining downward drivers are the disposals, which explain a variation of minus EUR 20 million, lower transformation charges as guided, which explain minus EUR 39 million, the net cost decrease of EUR 31 million, confirming our continued focus on cost discipline quarter after quarter. Restated for the disposal impact and GBIS costs increased, total costs are down 1.7% versus Q3 '25. As you can see on the right-hand side of the slide, the cost-to-income ratio is falling by around 4 percentage points from 61% to 325 to the current 57.1% in Q3 '26, which is better than are below 60% 2026 stocks. And finally, one important point in this slide is that all pillars are below the end of the year cost to income targets. Moving on to our cost of risk on the next slide. We can see that the cost of risk for the quarter stands at 28 basis points and is fully in line with our target range between 25 and 30 basis points for the year. At business level, cost of risk stands at 33 basis points for BPI, 11% for GBIS and 47 for MIRBFS. The cost of risk this quarter mainly comprises a stage 3 provisions, which account for EUR 488 million and are slightly up versus Q3 '25 driven by the normalization of defaults in MIBS from low levels observed in past quarters. In Stage 1 and Stage 2 provisions, we had a net reversal of EUR 80 million, mainly related to some transfers to Stage 3 provisions. As a result, total outstanding Stage 1 and 2 provisions decreased by 2.6%, while remaining at a high level of EUR 2.9 billion or 2x the 2 years of cost of risk. NPL ratio stands at 2.75% in Q3, down versus last year. And finally, the net coverage ratio remains strong at 81%. Let's now turn to Slide 9, where we can see the evolution of our strong capital position. The group's CET1 ratio stands at 13.4% at the end of the quarter representing a strong buffer over MDA of around 320 basis points. Now going through the bridge in the slide from left to right, we see that retained earnings contributed to an increase of 21 basis points even after accruing for 50% distribution payout. The group employee share ownership program has a positive contribution of 9 basis points. And all in all, other upticks impacts contribute to a net decrease of 3 basis points. Additionally, as you can see on the bottom right-hand side of the slide, all other capital ratios are comfortably above the regulatory requirements. On Slide 10, we can see that liquidity reserves remain very high at EUR 358 billion in Q3 with a balanced mix between cash and securities. The liquidity profile of the group remains strong with sound liquidity ratios. The LCR stands at 145% while the NSFR is 118, both well above regulatory requirements and in line with our [indiscernible] targets. The 2026 long-term funding program is fully completed with EUR 16 billion issued driven by a good access to liquidity in all currencies. And finally, deposit base remains strong, granular and highly diversified and overall the loan to depot stands at 74% at group level. In Slide 11, we show a summary of the P&L for the group for Q3, which we will cover in more details in the following slides. Let's now move to the individual businesses, starting with SocGen network, private banking and insurance on Slide 13. At SocGen Network, Q3 26 loans outstandings are stable compared to Q2 '26 and fell by 2% versus Q3 '25. Outstanding deposits are also stable compared to the previous quarter and fell 1% versus Q3 '25. This took place within the context of growth of retail savings and investment products. which contributed to the continued robust momentum in overall asset gathering. On one hand, AUMs in Private Banking reached a record high of EUR 150 billion at the end of September, up 10% versus Q3 '25. While on the other hand, life insurance outstandings stabilized at a record level of EUR 167 billion, increasing by 9% versus Q3 '25. Moving on to BoursoBank on Slide 14. We can see that commercial performance remains strong within the assets under administration gathering, which continued to grow, reaching EUR 86 billion at the end of September. This represents a 13% increase versus Q3 '25, included the continued increase in profit of 7% versus Q3 '25. Equally, life insurance outstandings increased by 17% versus Q3 '25 with a high 51% proportion of unit-linked products. The number of market orders increased substantially by 20% versus Q3 last year, up to EUR 3.4 million. On the lending side, total loans outstanding are up 7% versus Q3 '25. Number of customers reached EUR 9.4 million after onboarding 446,000 new clients in Q3. With a churn rate, which still remains at a very low level, below 4%. In Q3, BoursoBank net income stands at EUR 101 million, representing a total of EUR 277 million for the first 9 months of the year. This is well on track to exceed its '26 target of more than EUR 300 million. Finally, the [indiscernible] BoursoBank stood at 74%, illustrating the strong profitability of this market. Looking now at the whole pillar on Slide 15. Revenues for French retail, private banking and insurance increased sharply by 10.9% versus Q3 '25 driven by a 12.7% growth in NII and an 8.3% growth in fees. At the same time, operating expenses fell by 5.1% versus the same period last year. As a result, the gross operating income, GOI increased by 41.7% versus Q3 '25. And the cost-to-income ratio stood at 56.1% representing a substantial improvement of 9.6 percentage points since Q3 '25. Overall, the net income lands at EUR 682 million for the quarter which is up 55% versus Q3 '25, with a high RONE at 14.6% versus 9.9% last year. Moving now to Global Markets and Investor Services. Global market revenues are significantly up by 18% versus Q3 '25, supported by the outstanding performance of our equities franchise. We reported a record quarter in equities with EUR 1.2 billion in Q3 '26, growing by 45.9% versus Q3 '25 and driven by very strong business momentum in all key businesses and geographies. Revenues in fixed income and currencies declined by 20.6% versus Q3 '25 and in line with previous quarters, performance continues to be influenced by low activity in rates. Finally, revenues from Security Services grew firmly by 9.1% versus Q3 '25, thanks to strong commercial momentum and deposit growth in key markets. Now turning to the evolution of Financing and Advisory. Revenues increased by 4.2% versus Q3 '25 on the back of strong business dynamics. Global Banking & Advisory revenues grew by 2.5%, driven by core franchises. Structured finance kept growing thanks to strong origination momentum and robust client activity across key sectors. We also had a strong quarter in transaction banking and payment services. where revenues increased by 8.8% versus Q3 '25. The strong commercial activity continued to drive growth in fee income and client deposits in most of our key markets. And now moving to the overall view on GBIS. At the pillar level, revenues are up by 12.5% versus Q3 '25. In line with our disciplined track record, efficiency is a key priority for the group and therefore, also for the pillar. We generated 4.9 percentage points of positive jaws in the quarter driving our gross operating income up by 19.8% versus Q3 '25. This translates into a cost-to-income ratio of 57.4% in the quarter or 2.6 percentage points better than Q3 '25. The cost of risk remains low at 11 basis points, below the 13 basis points of Q3 '25 or 18 basis points average for the whole 2025. All in all, GBIS posted a net income of EUR 899 million, up by 22.4% versus Q3 '25. As a result, GBI has reported another quarter with high RONE, which stand at 19.8%. This is 2.4 percentage points higher than in Q3 '25. Turning to International Retail Banking on Slide 19. We see that in Czech Republic, KB continues to perform well, with revenues up by 4% versus 325 at constant perimeter and FX underpinned by strong loans and deposit dynamics, which grew by 9% and 7% versus Q3 '25, respectively. BOD in Romania shows a strong increase in loans of 11%, while deposits are up by 2%. This translates in NII up by 6%, offsetting lower fees. Revenues are overall up by 2% versus Q3 '25. Lastly, revenues in Africa and others were stable versus Q3 '25 driven by growth in core franchises. Loans and deposits are up by respectively 1% and 3% versus Q3 '25. Turning on to mobility and Financial Services in Slide 20. This quarter, the businesses printed lower revenues of minus 7.8% versus Q3 '25 driven by Ayvens' used car sales normalization. At Ayvens', the level of margins is high once again at 620 basis points, 30 basis points above Q3 '25 numbers. On the used car sales front, results continued to decrease over Q3 landing at around EUR 310 for the first 9 months of '26 within the targeted range between EUR 200 and EUR 600 for full year '26. All in all, the cost-to-income ratio improved to 49.2%, notably, thanks to synergies. And this implies a ROTE of 13.2% for the quarter. Both [indiscernible] ROTE are fully in line with the targets set for 2026. With regards to consumer finance, revenues increased by 7% versus Q3 '25, supported by high NII, which benefits from continued proactive repricing policy. Overall, in Slide 21, the pillar recorded lower revenues by 4.3% versus Q3 '25 at constant perimeter and FX. At the same time, MIBS continue to monitor strictly its costs, leading to a 2.6% decrease versus Q3 '25 at constant perimeter and FX. All of this translates into a cost income ratio of around 52%, which is below the 55% target set for '26. Cost of risk this quarter stood at 47 basis points, slightly up versus 43 basis points in Q2 '26 and roughly consistent with the 40 to 45 basis points through the cycle cost of risk estimated for the pillar. All in all, MIBS printed a net income of EUR 349 million down by 8.6% versus Q3 '25 at constant perimeter and exchange rates, equivalent to a RONE of 12.9%. To conclude with the quarterly results, let's move quickly to Slide 22 with the corporate center. Similar to previous quarters, revenues improved versus Q3 '25 driven this time by positive revaluations of liabilities accounted at fair value through P&L. Overall, Group net income is almost stable versus Q3 '25. And let me now give back the floor to Slavomir.

Thank you, Leo. And turning now to sustainable development. This quarter once again demonstrates the strength of Société Générale's position as a trusted partner for our clients as they navigate the energy transition. Recent transactions demonstrate the breadth of our capabilities from battery storage in Australia to grid infrastructure in the U.K. We are supported an innovative project in Italy that combines solar energy generation with biodiversity considerations in agriculture. Partnerships remain a key enabler of our strategy and an important way to increase our impact. We continue to work with multilateral institutions to develop blended finance solutions and continue, for instance, to partner with the EIB in supporting the growth of European Clean Tech. So taken together, these achievements reflect the consistency of our approach, combining sector expertise, financing capabilities and strong partnerships will continue to support our clients' transition strategies. In conclusion, we keep building momentum and keep improving our performance quarter after quarter. We will exceed our 2026 targets. And with the same discipline and determination, we will reach our 2029 goals. Thank you very much, and we will now open the Q&A session and ask everyone to keep to 2 questions per person as usual. The floor is yours.

[Operator Instructions] The first question comes from Tarik El Mejjad of Bank of America.

Two first, two please. First on the equities business. This quarter, you've actually delivered a very strong performance in line with the big equity houses, I guess, in Europe. Can you explain -- I mean in your slides, it was very short expansion saying [indiscernible] did well across regions and products. But can you maybe go a bit in detail what has worked well this quarter? And also when you look at actually the balance sheet with that work to deliver this RWA wins up quite a lot. That's in the global -- in financing activities and advisory, sorry, that went down a lot. So are you thinking of RWA we did GBIS? Or is completely independent where you manage the balance sheet and should expect some reversals on some of the other [indiscernible] the Global Markets part? So that's the first one. Second one on capital. I mean you've been very clear in your recent CMD about the pattern or the cadence rather on distribution with full year and then with Q2 results, some excess capital above 13%. I mean, things have changed a lot since our CMD with the noise around France and your shares have derated materially would you consider be more agile around excess cat return and leverage on your actually distressed multiples and use the accretive aspect of the buyback will benefit from?

Thank you, Tarik. On the equities, the comment is very short because it just simply states the reality, which is it's across the entire scope of the businesses. Literally, every unit performed well. If you want to get some more color, I can point to better financing rates for us, which help the financing side of the business, strong volatility and commodities clearing on the future side was supported Investment Solutions and the linear business benefited from actually stronger equity markets and a lot of commercial appetite. So it was really across the board. And this is why we're very happy. We're also benefiting from the burst in consolidation. I mean it's really across the board. And no specific, again, one-off or specific outperformance of one particular business. So this is why we're very happy about this. In terms of the RWA. Listen, if you look at what happened in terms of the RWA within the market, it's actually a very small increase in terms of overall RWA. Market risk stable. And by the way, I should have mentioned that this performance of equities was also reached with no change in broad balance sheet usage or more importantly, stress test usage, right? So completely in line with our risk profile and risk approach. And coming back to the RWA, so market risk stable and credit risk RWA slightly up single digit. So that's that. In terms of the capital, listen, let me put it this way, right? You expect us, our clients expect us -- investors expect us to be nimble in markets that change very often in terms of especially these years in terms of outlook, prospects, trends, news flow and so on and so forth. So if that makes sense to you, you should expect us to be nimble when considering the execution piece of our capital management policy.

Next question is from Giulia Aurora Miotto of Morgan Stanley.

I have 2. The first one, I wanted to follow up on nimble. So can we expect then a buyback in Q4 given how attractive the level is, the share price level is? And then my second question is more numbers driven on French retail, fee growth of 8%. And how much of that was driven by the change in accounting on the way you book the customer acquisition cost in BoursoBank, please?

All right. So on the first question on being nimble, it's -- I mean, it's very simple in the end, right? We have a very strong statement that we've been consistent with, which is that we intend to operate the business at slightly above practically 13%, but with like strategic objective to be at 13%. We have a component which is the regular ordinary distribution, which you know well, with some flexibility there. in terms of what's the portion for the dividend and what's the portion for the buybacks, balance. So like we said in the past and actually acted upon this something between, let's say, 40 and 60 in terms of respective shares depending on market conditions and other considerations that ultimately, the Board may have when it decides it makes the decision in February. And then there's an exceptional distribution potential, right, depending on, again, our little framework in terms of what goes into organic growth, what goes potentially into an inorganic moves and what can be used for exceptional distribution. So within that framework, right, we have to take into account both the performance of the group, both the absolute level of the ratios and of course, market conditions, like we do this for a living for everybody, it would be weird for us not to do it for ourselves. In terms of the -- when you said -- you were talking about the increase in fees for the second part of your question?

Yes. Yes. The fee is in the French retail or just part of it comes from the change in accounting.

So it's -- I mean, it comes from a very good performance, as you may have seen of basically our asset gathering business within the French retail and across all of the components, if you will, because as much as the deposits are basically flattish. We have actually, as you've seen, strong increases in terms of asset gathering and actually strong increase in that side of the business, financial fees and so on and so forth. So that's the main driver. And in particular, [indiscernible] and private banking actually. And then in terms of the overall performance, indeed, of course, the new accounting rules for capitalization of acquisition costs allow us to do, as you've seen, both a very strong acquisition, which is close to 500,000 new clients this quarter, which is like close to the maximum pace that we expect to have, while generating substantial bottom line because of the benefit. And actually, the substantial bottom line is somewhat higher this quarter because we just started to do this, right? Obviously, as we layer new capitalizations quarter-after-quarter for the acquisition costs, that upside, if you will, will tend to converge to the long-term guidance that we gave of above 45%.

The next question is from Delphine Lee of JPMorgan.

So my first one is just on French retail. Just trying to understand a little bit because the volumes on the lending side and on deposits have been a little bit muted slightly down. Are you starting to see a little bit of that impact from the sort of political and social environment or is that rate going up? I mean any color here? And also on deposit mix with site deposits, it mix is margin change, but like any expectations here that with higher rates and area, you might start to see something or you're quite confident about your assumptions so far. . And then my second question is on the cost side of it. I mean, you're clearly tracking very well versus your -- versus this year's target. I know it's been a little bit early, but like any indications of sort of like how much we should expect maybe for next year, you have already said that the CMD that a lot of it would be front loaded. So just trying to understand a little bit the pace here.

Thank you. So on the first question, Listen, I mean, there's nothing at this point that I would characterize as structural in what you see. I mean the activity is not booming in France. That's not news, obviously, to anyone. But it is in that fairly stable, let's say, ZIP code, so to speak. Now remember, One of the drivers of the volumes on loans are the mortgages. And the mortgages, as you know, in France, is a topic which is both absolutely critical in terms of commercial momentum and commercial performance because it is an anchor product for the relationships with the retail clients. On the other hand, it has a challenging pricing, let's put it this way. And so what we tend to do is we tend to be strategic in terms of how we market this product, throughout the year. And typically, we have been more on the slow end of the dynamic at the beginning of the year. We have accelerated then in Q2, and you will see that marketing acceleration move through the volumes later during the year. So that's on the margin what you could see. Now on the deposit, remember, same thing in France, you have this coexistence of the life insurance wrapper and other ways of investing your excess liquidity, if you will, for the clients. and you see the very strong momentum that we have on that end of the spectrum. So that's mostly how you explain a subdued dynamic on the deposits. In terms of the forward-looking portion of your question, at this point, we definitely expect a cost of funding to increase a little bit with the [indiscernible] expected increase in 2027. That's for sure. But that obviously was already in our planning and in our scenarios at the CMD and earlier. So we don't expect changes at this point to our outlook there. And in terms of the behavioral component linked to a higher interest rate environment, we believe, but we have a lot of humidity, right? When it comes to behavioral changes on deposits in France, I mean, we learned the lesson of 3, 4 years ago. And so with a lot of humility, but -- we believe that a lot of the behavioral component has already happened, and it's kind of part of the new behavior. So at this point, we do not expect significant swings in that behavioral characteristics of the market and therefore, do not expect a major shift in our outlook for this business. In terms of the costs, Overall, well, I mean, as discussed indeed during the CMD, we have a trajectory which was rather front-loading the cost benefit, and we don't expect this to change. at all, actually, right? If anything, we're constantly, constantly focused on cost discipline. The only variable and you've seen this perfectly this quarter is if we have a strong outperformance in a particular business, you will see a cost impact, but as perfectly evidenced this quarter, which will be more than accretive in terms of its impact on both cost to income and positive jaws. So that's that.

The next question is from Chris Hallam of Goldman Sachs.

I have 2 questions, both on Global Markets. I just want to come back to you to the first question on equities because in Q2, you said you were making a sort of a conscious decision not to fully participate in the very vibrant markets that we saw. And now this quarter, clearly, there's a big contrast. It looks like you really did fully participate. So I just wanted to understand sort of what changed either in terms of market conditions or in terms of your own risk appetite Q3 versus Q2? And then second, and again, a little bit of a follow-up to the comments you just made [indiscernible]. There was 11% OpEx growth, I think, in Global Markets this quarter. Is it possible to split out how much of that was sort of directly related to higher revenues? How much of that was related to the build-out you've talked about across new products and new markets? And then how much is the sort of underlying OpEx growth run rate if revenues were flattish?

All right. So in terms of the equities, again, as evidenced by both the market risk RWA and my statement earlier about balance sheet usage, being broadly in line with our appetite and market stress, most importantly, kept at the similar level as these past quarters and years. It was not a shift in risk appetite. It's really driven by the fact that our businesses benefited from higher high-quality commercial flows. And this is why we have this, let's say, consistent participation with the market, right? I mean last quarter, what happened was different, right, and was driven by a different positioning and something which we were feeling was more risk intensive. This quarter, the commercial activity, which is the core focus of what we're trying to achieve in this business in the other markets business. was very strong across the board, right, as I said, including in futures clearing and so on and so forth. So again, as evidenced by the data on market risk RWA, it's -- and what I'm saying about the stress test, it's no adjustment to risk appetite. In terms of the costs, you have mostly it's linked to the variable compensation, right? So you have, of course, some even sheer market execution fees can go up here and there, but these are marginal lines. I mean the overwhelming impact that you see is linked to variable compensation and the build-out in some of the businesses and namely Prime is really within the trajectory is not like some new spend that we would have started in again, the IT platform, which is the last piece that we're investing on, on the prime side is something that we've been doing right at our own pace, with our own, let's say, investment policy in terms of cost for now a few years and we're continuing to do this the same way. So no expectation for the structural cost to really go much higher than what you see in the trends in the last few years.

The next question is from Jacques-Henri Gaulard of Kepler Cheuvreux.

Yes. We're going to talk again about equities, right? Because it's been really good and it's really pleasant. I was wondering the portion of burn still in that or more generally, if you're not comfortable isolating, how much the ROI now of that acquisition has been? And in light of, I guess, how successful it has been into you delivering that? What about trying to actually get to this type of this acquisition in that business in particular? And I was thinking about Prime. And the second question, I guess, linked to that is, are you happy about the organic development in Prime or comes the moment where okay, you need to really buy a book or get to a niche player there and try to change the scale?