Societe Generale SA

Thank you very much. Good morning to all of you. Thanks for attending this conference call. As usual, Claire Dumas, our CFO, and myself will go through as briefly as possible our presentation, and then all our management team will answer your questions. with, as you remember, this, if I may say, nice discipline to try to stick, at least to start with, with two questions per people to let everyone asking a question. Let's go through the presentation and start with the first slide where you have actually a summary of this very dynamic first quarter. As now foreclosed to three years in a row, We are presenting a very strong set of quarterly results above expectations. It is based on robust business performances, solid business revenues in particular, and of course with an even higher figure if you take into account the IFRS 17 adjustment, it's an equivalent of 200 million euros revenues versus the previous way to report. And apart from French networks, we have across the board very good performances, in particular regarding Boursorama, ALD, international retail, as well as global banking and investor solutions. Regarding the French networks, we will go through the detail. As you have seen, we've all the large players in this market. There are specificities in the French market, and it means that we will have temporarily for this year, till the beginning of next year, a decrease of net interest margin, but with a rebound in 2024, and so we are confident with the trajectory of our French retail business. At group level, you can see also the strong and disciplined monitoring of our costs. This is not something also which just relates to this quarter, a permanent effort. Cost of risk is very low, as you have seen, while we maintain a very prudent provision. We will go through the detail. And overall, we present a very robust balance sheet in all the dimensions, credit quality, capital level, and liquidity ratios. you might have seen that we can confirm the approval by the European Central Bank of our share buyback, the €440 million share buyback, which is part of the 2022 distribution. I just would like to highlight that beyond these results, there is, of course, further very important milestones in our strategic projects, which have been completed or are about to be completed in the very coming few days. Regarding our French networks, the merger and the creation of our new SG bank, we had a very first successful IT migration in March. The second one, which will complete their job in terms of the creation of the new bank, will take place this weekend, actually on the 13th and 14th of May. and will allow then all the teams and the management to concentrate on the implementation of the new business model and, of course, the extraction of the synergy, both in terms of revenues and in terms of costs. Regarding Borsorama, we are exactly in line with the trajectory we have presented. We've, in the first quarter of 2023, a break-even, while still conquering a strong number of new clients, close to 300,000, in the first quarter. Third, we have scheduled an extraordinary general meeting for ALD on the 22nd of May for the closing of the acquisition of LEAF plan, and eventually, regarding Ben Stein, we signed the acquisition agreement. So a very busy, but I would say successful quarter, also from a strategic point of view. Now I turn the floor to Claire, who will enter into more details in the figures.

Thank you, Frédéric. So as previously highlighted, the group delivered in the first quarter a robust operating performance with an underlying gross operating income at €2.5 billion into one. This performance has been notably driven by overall solid revenues, which are slightly down at group level, but up 0.3% for the businesses, at constant exchange rate and perimeter and compared to a very high Q1 last year. They are even 16% higher than Q1 2021 on a pro forma basis under IFRS 4. At the same time, underlying costs remained under control with an increase of 1.3% Overall, the underlying cost-income ratio, including SRS posted in Q1, is at 60.5%. Moving on to the next slide, 6. The cost of risk remains low across businesses in Q1. At group level, it stands on an average at 13 basis points. Once again, it illustrates the quality of our assets and our strict and prudent risk management policies. We still do not see any material deterioration of our portfolio. The NPR ratio is stable at 2.8% at the end of March, and the growth growth rate is still around 49%. On the back of this low quarterly level, and given the quality of our credit portfolio, we now expect the cost of risk to be below 30 basis points. Let's turn to the next page, slide 7. As illustrated in the chart on the left-hand side, and in line with previous comments, defaults remained low in the first quarter, in absolute terms at €206 million, or 14 basis points. It's also true in relative terms compared to previous years, both in nominal terms and in basis points, despite the tougher environment. At the same time, we maintained a prudent provisioning policy in the quarter, by keeping stable the precautionary provisions of Stage 1 and 2 assets in Q1. At the end of March, the total outstanding in Stage 1 and 2 provisions is stable and remains close to 3.8 billion euros. Let's now have a look on our corporate portfolio, which accounts for around 34% of the group's total exposure at defaults. As you can see on slide 8, it's highly diversified in terms of sectorial exposure. The concentration risk is low, in line with our risk management policy. This is particularly true for sectors that have focused attention in recent weeks. For instance, the exposure to U.S. regional banks is very low, with a total exposure at default below 100 million dollars. The exposure to commercial real estate is limited to 1.9% of the group's EAD, out of a total exposure at default of 3.2% on the corporate real estate sector. The commercial real estate portfolio is sound. It's diversified in terms of asset classes and geographies, mainly geared towards Western Europe at 79% and largely in France. It's also managed from a risk perspective. In particular, the actual LTV of this portfolio stands at around 50% on the back of current underlying policy, based on a maximum LTV of 65% at origination. The exposure to offices or assets in the U.S. are both limited. Around 50% of the exposure is with investment-grade counterparties, and the stage 3 exposure is around 1.3%. On leverage finance, as disclosed last quarter, we have always maintained a cautious approach and applied strict risk management. In line with this approach, the exposure on LBO is low and remains limited at around 5 billion euros, which represents around 0.4% of the total group's exposure at default. Finally, on the ration of share portfolio, the exposure further decreased by 200 million euros in Q1, to reach €1.6 billion at the end of March, thanks to a continuous flow of repayments. We have adjusted downwards the net exposure at risk, which is now estimated below €0.5 billion. It's largely covered by a stock of provision of around €0.4 billion. Let's now turn to Capital Slide 9. At the end of March, the group had a very solid core tier 1 ratio of 13.5%, which is 410 basis points above the MDA. The fully loaded ratio increased by 10 basis points in Q1 compared to Q4 last year. This increase is a direct result of a solid organic capital generation of 14 basis points in Q1, plus provision for distribution. The impact of the regulatory adjustment on the models is limited to four basis points this quarter. Last, the other items have a net negative impact of one basis point. It notably includes a positive impact of eight basis points linked to the implementation of IFRS 17 and IFRS 9 on the entrance activities and, on the contrary, a negative impact linked to the deduction of treasury shares in line with EDA guidelines. For the capital ratios, they are also all comparatively above requirements. Moving on to liquidity, slide 10. As illustrated in the chart, slide 10, the standard balance sheet of the group is very solid, with an excess of long-term resources, high deposit base, and liquidity reserves, and a limited reliance on short-term funding. In Q1, the robustness of the liquidity profile has even been further strengthened with the rise of the liquidity reserves, which represent almost 30% of our selling balance sheet, and an increase by 0.7% of the deficit base at 598 billion euros. The deposit base of the group is sound, highly diversified, and granular. It's largely composed of deposits in our retail activities for more than 60% and of business-driven deposits made by corporates. We treat the group as a very close, long-term relationship. It's also important to note that more than 60% of the deposits made by individuals are insured. Overall, the loan-to-deposit ratio stands at 84% at group level. Last, it's useful to remind that, in line with our policy, assets in dollars are fully funded by resources in dollars. We have actually excess resources in dollars, which are deposited at the same. We indeed benefit from highly diversified and stable resources in USD, with very limited reliance on money market funds. Let's now have a look at the liquidity reserves and the morale ratio, slide 11. As illustrated in the chart, the liquidity reserves are very high and have steadily increased over the last quarter. They represent around 2.5 times the amount of short-term and long-term wholesale debts maturing within the next 12 months. They are largely composed of excess cash deposited at central banks, mostly at the ECB and the Fed. On top of that, we have around 56 billion euros of HQLA assets eligible to the LCR ratio. They are mostly composed of highly rated sovereign dates, which are edged against interest rate risk with FAS. Overall, the LPL remains at a very high level and has further increased since the end of 2022 from 141% to 171% at a level well above our minimum steering flow. Regarding the Mahal ratio, which is another important aspect for European banks and depositors, It stands at 34.3% in terms of LWE, with a total outstanding of €124 billion of eligible debts. As for the other ratios, it's well above requirements, with notably AT1 and TA2 buckets comfortably above minimum requested levels. Last, note that the Vanilla Long-Term 2023 funding program is well advanced, above 70%. I will not comment slide 12. Let's now look at the business performance in the France Networks and Private Banking, slide 14. On the credit side, total loan outstanding is flat in Q1 versus last year, with still mixed trends between retail and corporate. With corporate, the activity remains constructive. Loans excluding PGE are up, plus 4.5% versus last year, driven by both medium long-term credit and treasury loans. On state-granted loans, we continue to have normal repayments, and the amount has gone down from around €18 million at the end of 2020 to €12 billion currently. Regarding loans to individuals, we have maintained a voluntary selective approach in production to limit the impact of the usury rate, which is translating into a decrease in production on a yearly basis. Despite this drop in production, home loan outstandings are at this stage still stable on a yearly basis. On the deposit side, total outstanding is up 1% compared to last year. The deposit base is diversified and solid with both households and corporates, which have, for the latter, started to shift part of their site deposits to term deposits or to interest-bearing on or off-balance sheet products. On savings, we experienced overall resilient AUMs. Life insurance outstanding are flat, with gross inflows amounting to 3.3 billion euros. Private banking assets under management, excluding the formal extra business, was up 2%, with net inflows of 2.5 billion euros. Finally, Premier and PNC were up 7% in the quarter, and personal protection continues to rise by 3% versus last year. Moving on to Borsorama, slide 15. Borsorama has reinforced its leading position in France in the online banking, with 297,000 new clients during the quarter to reach a total of 4.9 million clients at the end of March. which represents a 34% increase compared to last year. It's composed of high-quality client base, which actively uses Bursorama on tracking basis and has primary banks for more than 50% of them. With regard to customer relation, it's important to highlight that Bursorama is number one in customer satisfaction, with the highest net promoter score of plus 36%. On client equipment and monetization, Boursorama continues to make strong progress in line with the evolution of its client base. Loan outstanding are up by 7%, that is Q1 last year. Deposits and financial savings increased significantly by 39% to €51 billion. Additionally, we still observe dynamic day-to-day banking operations with a 48% growth in payments and withdrawals, that is last year. This strong growth in outstanding is starting to bear fruit on the financial front in line with our expectations. Indeed, as mentioned in slide 16, Bostorama is breakeven in Q1 while maintaining a solid new client acquisition rhythm. This is firstly due to a strong increase in revenues in Q1, which has been multiplied by 1.6 times compared to last year, excluding new client and boarding costs. Bostorama fully benefits from its enlarged client base and fast-growing deposits and savings base in a positive rate environment. At the same time, the acquisition cost per client and the cost to serve have continued to decrease consistently with the high scalability of the model. As an illustration, the number of employees have increased by less than 50 in total since January 2022, while at the same time, Postorama has gained more than 1.8 million new clients. Let's now focus on the French retail banking net interest margin approach, slide 17. As indicated last quarter, 2023 will be a year of transition with a temporary decrease in net interest margins before a rebound expected in 2024. First, the net interest margin will be negatively impacted in 2023 by the end of the benefit of the TLKRO, with a negative impact of about minus €300 million compared to last year. It will also suffer from the specificities of the French market. Hence, depending on the LIREA rate devolution, regulated savings weighed up to around 400 million euros this year, as we have a sensitivity of around minus 50 million euros for each plus 25 basis point rate increase. In addition, the usury rate has impacted and continues to impact loan production in terms of both volume and margin effects. At the same time, will not benefit from positive rates on deposits before 2024 due to a short-term hedging policy of the net interest margin put in place until early 2022 in an environment of negative or very low interest rates. Based on forward rates at the end of March 2023 and an assumption of a three-month variable of 3.75% Q3, the net interest margin is expected to be down by around minus 15% to minus 20% in 2023 versus 2022, before mechanically rebounding in 2024 at a level comparable to 2022 with the extinction of the hedges and to further improve in 2025. Note that this projection is based on assumptions on a balance sheet which are consistent with the current economic environment, i.e., first, a slight erosion of loan and deposit outstanding despite unexpected GDP growth, and second, a continued shift toward interest-bearing products of part of the deposit space. Let's now come back to the quarterly numbers, slide 18. In terms of P&L, the French retail banking activities generated a net profit of €138 million in Q1, despite the pressure on the NIM, which will last until mid-2024. The total revenues, excluding PEL-PEN, are down 9.5% versus last year. Regarding costs, they remained under control and well below inflation. The decrease by 2% on reported basis compared to last year and are flat on an underlying basis. But last but not least, the cost of risk remains low at 14 basis points. Overall, the underlying RO&E comes to 7.5% into 1. On international retail banking, slide 19, commercial dynamics continue to be well-oriented across regions. In Europe, loan outstandings are up 8% and deposits increased by 2% on a yearly basis. On deposits, total outstanding strongly increased by almost 7% compared to December last year. In Africa, the economic environment has further improved, which has contributed to maintaining good momentum across geographies. Overall, loans and deposits both grew by 5% versus Q1 last year. Driven by these solid commercial performances, revenues increased by nearly 7% compared to last year at constant exchange rates and perimeters. This results from both strong growth in Africa with a 15% increase in revenues and a continued solid performance in Europe with a 19% rise in Romania and a still high net interest margin in Czech Republic. Overall, our international division posts once again a very satisfactory performance this quarter, with an underlying RO&E at 18%. On insurance and financial services, slide 20, the performance remains strong, with an underlying RO&E at 28%. On insurance, the commercial trends are silly. Life insurance growth inflows amounting to 3.6 billion euros in Q1, notably thanks to a dynamic trend in France with a 2% rise versus Q1 last year. Total life insurance outstanding stands at 133 billion euros at the end of the quarter, with a further increase in unit links at 37%. Our protection premium continues to increase on predictions Premium continued to increase, plus 4% versus Q1 last year, driven by a continued increase in penetration rates, and still very good dynamic in P&C Premier, which are up by 7% versus Q1 last year. Overall, revenues generated by the insurance division rise by 51% in Q1, under the new IFRS 70 norm, which is applied for the first time this quarter. In addition to this solid commercial performance, this strong increase also results from a volatile effect linked to IFRS 17 that led us, due to the mark-to-market of certain contracts, to restate the Q1 2022 revenue base by around minus 40 million euros before reversing it into two. It's an illustration of the volatility of revenues that IFRS 17 could generate going forwards. For financial services, revenues increased by 26% in Q1, thanks to a 30% rise for ALD, which benefited of both a solid growth of the funding fees by more than 3% and a continued strong contribution of used car sales and positive impact of depreciation adjustments. To sum up slide 21, IBFS delivered another strong quarter with an underlying revenue of 22.7%. Revenues increased by 15% at constant exchange rates in perimeter versus Q1 last year, allowing for positive jobs despite the impact of the preparation costs borne by ALD for the acquisition of Lisplan. Moreover, as for the rest of the group, cost of risk remained low in Q1 at 27 basis points Turning to GMRAs, total revenues are slightly down by minus 1.7%, like 2022. Starting with global markets, it was once again an excellent quarter, with total revenues exceeding 1.7 million euros, a level comparable to a record Q1 last year. This is now almost the third consecutive year of strong performance, the 11th quarter in a row precisely. It further demonstrates the soundness of our setup and risk management, the strength of our franchisees, and our ability to navigate different environments. In detail, for 16 terms, this is an outstanding performance with a plus with an 890 million euro contribution, up by 16% as of Q1 last year, and 54% in comparison to Q4. The VIG platform keeps benefiting from the conducing rates and forex environment. Equity activities performed quite well in Q1, despite the context of lower volumes and volatility. Revenues are down 18% on a yearly basis compared with a record high in Q1 last year. If we compare to Q4, they are up 29%. Security services was up 12%, benefiting notably from the re-evaluation of our 14-year clear. On financing and advisory, slide 23, revenues are up 5% versus Q1 last year at 827 million euros. Global banking and advisory realized once again an excellent performance in Q1 with revenues close to historical highs. Momentum remained strong in asset finance across all asset classes, especially in aircraft industry. The performance was also robust in investment banking with a rebound in revenues notably driven by DCN and TMC finance. Last, the level of activity was overall good in asset-backed products and natural resources, with a slight decrease in revenues compared to a very high Q1 last year. We notably benefited from continuous solid growth in renewables. In transaction banking, performance continued to be excellent, with a 51% increase in revenues compared to last year, thanks to a steady commercial growth in a positive interest rate environment. Overall, slide 24, GBs delivered once again an excellent quarter. Revenues are stable in comparison to a very high Q1 last year and thus remain under control. They are down by nearly 6% on the reported basis and slightly up by 1.7% on an underlying basis excluding SRS. This translates into a competitive underlying income ratio excluding SRS of 53.7%. In terms of profitability, TBAS delivered an outstanding quarter with an underlying revenue up by nearly 4 percentage points compared to last year at 24.7% each one and above 27, excluding SRF. On the corporate center, slide 25, Revenues are impacted by the unwinding of the hedges on the TLPR hoop, following the decision made last year by the ECB. The total impact is expected to be around €300 million in 2023, out of which €100 million in Q1. In addition, the implementation of IFRS 17 impacts both revenues and costs by around €70 million in Q1. Regarding operating expenses, as usual, Inc. includes the transformation charges for a total amount of €182 million, largely related to costs linked to the merger of the French networks. All in, net contribution to the group's net results is negative by around €400 million into one. I will now let the floor to Frédéric for his conclusion.

Thank you very much, Claire. Let me just conclude by saying beyond, of course, the strong first quarter and, of course, having in mind the eve of our management change in two weeks' time, we again are implementing successfully a renewed business model. The creation of this new bank on the French retail market, branded Société Générale, with a remarkably well-managed merger process with this last milestone during this weekend. Boursorama, which is reaching a 5 million client figure and which will be a differentiating asset for the coming years. And of course, with the acquisition of this plan, the creation of a leading global player in sustainable mobility, which in my view will be an opportunity for a sustainable and profitable growth for the coming 10 to 15 years. Let me say, of course, there is still hard work remaining in the coming years to extract the value of all these projects. But of course, with these milestones about to be completed in the coming days, the execution risk is certainly, in my view, significantly reduced. And I just would like to share my conviction that these new developments will definitely help us to meet our objectives in terms of sustainable profitability. Eventually, let me just say that I'm happy and proud that the management transition process went very smoothly and has allowed Slavomir Kupa, my successor, ready to take over in the best conditions and without, of course, losing any momentum. So now we are ready to answer your questions. Again, the floor is yours.