Societe Generale SA

Good morning, everyone. Thank you very much for joining our quarterly earnings call. This quarter was marked by a good commercial performance in most of our businesses, a limited increase in operating expenses, and a low cost of risk. Global banking and investment solutions in particular posted stable revenues compared to a high reference point reached last year. and international retail banking maintained as well as solid performance. On the other hand, the group's net result was penalized by the negative effect of short-term hedges on net interest income in the French retail, the impact of which peaked in Q3 23. It also includes, as announced during our Capital Markets Day, exceptional accounting items with no impact on capital ratio and no impact on shareholder distribution. On the one hand, it was the impairment of goodwill, and on the other hand, provisioning of deferred tax assets for a total negative impact of €610 million on the net income. This leads to a group debt income of €295 million for the third quarter, €905 million excluding the non-cash items, and it amounts to €2.1 billion for the first nine months of the year. On costs, operating expenses are up by less than 1 percent at the constant perimeter, leading to a cost-income ratio of 70.4 percent for the quarter. And this ratio stands at 72.4 reported for the nine months and 68.9% if we exclude the contribution to the SRS. Regarding cost of risk, the defaults remain limited and we maintain a high S1, S2 inventory. And all the cost of risk is at 21 basis points in Q3 23. Overall, the reported ROTI stands 3.8%, 6% excluding non-cash items, and it is at 5% for the nine months on an annualized basis versus 1% last year. Excluding the contribution to the SRF, the nine months 23 ROTI stands at 6.5. Allow me here to make the comment that this is the first quarter where we to apply our new approach to the results communications with a focus on the reported numbers, which obviously is a significant change that has to be kept in mind. Finally, in line with the previous quarters, the balance sheet is very solid with a CET1 ratio of 13.3%, up to 20 basis points this quarter. and a robust liquidity profile with an LCR ratio in particular which remains strong at 147 percent thanks to high liquidity reserves and stable deficit base. Before leaving the floor to Claire, I simply would like to take a brief moment to highlight once again our strategic ESG ambitions and in particular the commitments we announced during the CMD. with the addition of a new target today on steel, which we disclose as part of these results. As explained, September is at the heart of our strategy. We are strongly committed to a more sustainable world and to increasing our contribution to the UN sustainable development goals by both accelerating the pace of decarbonization of our businesses, but also, as you know, through investing for sustainable future through a €1 billion investment fund, and also relying in our thinking and decision-making on the inputs of the Scientific Advisory Board, because these topics are complex and require scientific foundations to enhance the decision-making. ESG is imperative for us, it's fundamental to our strategy, And it has been once again recognized by Sustainalytics this quarter, positioning us among the best banks in the world and the only French bank rated low risk. I will now leave the floor to Claire, who will give us more details on the financial results.

Thank you, Flavomir, and good morning to all. Let's start now by looking at the revenues on slide six. In Q3, the group reported total revenues of 6.2 billion euros, down minus 6.2% compared to a high Q2 in 2022. Business by business, global banking and investor solutions recorded solid activity with revenues almost stable compared to a very strong Q3 last year, thanks to a robust performance of market activities and a record third quarter for financing and advisory. Similarly, international retail banking posted solid revenues, up by 3% compared to Q3 last year, thanks notably to a solid momentum in Romania and a strong performance in Africa. However, those good business performances do not allow to fully mitigate the decline in revenues, which is due to First, the continued negative impact on French retail of short-term hedges of the NII, which peaked in Q3 before maturing progressively in H124. Adding the wholesale impact, the NII in French retail is down by €317 million compared to last year. Second, a decrease by €270 million in revenues of the corporate centre due to the impact of the unwinding of the hedges under TLTRU, and to a base effect compared to Q3 2022 on volatile items. Also, note that the integration of Lisbon results in a contribution of over 300 million euros of additional revenues. Over the first nine months of the year, the trend is similar, with good performance in GBIS and international retail, while the decline in revenues comes from the NII in French retail, the impact of the hedges on the CLCRO, and one less impact was disclosed in Q2. This is also the consequence of a very high 22 comparison base, which explains, for example, why market activity shows a decrease in revenues of almost 300 million compared to last year. Overall, the revenues generated since the beginning of the year are in line with 21. Let's have a look on the operational performance on slide seven. Despite the integration of this plan, which contributes to around 340 million euros in the cost base, operating expenses only increased by 2.4 percent over nine months compared to last year, a level well below inflation. Excluding the changes in perimeter, the positive evolution of the contribution to the SRF and the transformation charges, the increase in the nine-month curve base amounts to around €250 million compared to last year, which means less than 2%. This illustrates the importance we place on strict cost management, which we intend to further strengthen going forward. All of this leads to a reported cost income ratio of 72.4% for the first nine months in 2023. It's 68.9% excluding the contribution to the SRS. As indicated during the Capital Market Day, we expect a linear improvement of the cost income ratio from 2024 onwards. Let's now move on the next slide on the cost of risk. It remains contained across businesses. At group level, it stands at 21 basis points in Q3 and 15 basis points in nine months. It demonstrates once again the quality of our assets, which still with no material deterioration of our portfolio. For the quarter, the cost of risk amounts to €316 million, of which €419 million in Stage 3, and a net reversal of €103 million in Stage 1 and 2. Regarding the latter, it's mainly explained by your reversal of provision and ration assets linked to the significant decrease in ration exposure, as we will see in a few moments. The NPR ratio remains low and stable compared to Q2 last year at 2.9% compared to Q2 this year at 2.9%. The gross coverage ratio is solid at 46% and the net coverage plus collateral and guarantee stands around 80%. At the same time, we maintain high precautionary provisions on stage one and two assets in Q3. At the end of September, the total outstanding of stage one and two provisions amounts to 3.6 billion euros, i.e. 2.8 times stage three cost of risk in 19. In this context, we revised downwards our cost of risk guidance for the year, which is now expected below 20 basis points in 23. A few words now on risk management on slide nine. First, we think important to update you on the ration exposure. The group has further materially reduced its offshore exposure, which now stands at 1 billion euros at the end of September. It represents a 38% decrease compared to end of June. The net exposure at risk on this portfolio is now around 300 million euros before provisioning. The residual risk is highly covered by a total provision of around 200 million euros. The onshore exposure remains limited at 15 million euros. Overall, this orderly exit from Russia contributes to further reduce the tail risk at group level. More broadly, the group can rely on a strong asset quality, as illustrated once again by the low cost of risk even in a more challenging economic environment as it is today, with higher rates and inflation. Our home loan portfolio is, for instance, largely composed of fixed-rate loans, which is very protective for clients. At the same time, we have maintained strict monitoring, current origination policies, and limited exposure to the most sensitive sectors and asset classes. such as commercial real estate, LBO, non-banking financial institutions, or even with professionals and SMEs, notably in the construction, non-food retail, or catering sectors. All of these led us to revise downwards our anticipation in terms of cost of risk. Let's now turn to capital flight chain. At the end of September 23, The quarter one ratio lands at 13.3%. It's up 20 basis points compared to last quarter, and it's now 350 basis points above the MDA. The fully loaded ratio stands at 13.2%. The strong quarterly increase results first from an organic capital generation of 15 basis points, plus provision for distribution, And second, from a decrease in organic RWA for an equivalent of 16 basis points, mainly due to a strict monitoring of RWA, combined to a lesser extent with some delay in capital consumption of businesses. This is a perfect illustration of the kind of monitoring of organic capital we intend to have. This quarter, we also benefited from six basis points related to the Group Employee Share Ownership Programme. On the contrary, regulatory items have a negative impact of 16 basis points in Q3. Overall, the risk-weighted assets remain broadly stable at €384 million, and the other capital ratios are all comfortably above requirements. Moving on to liquidity, slide 11. First, let's note that our 23 long-term funding program is almost completed at 98%. The funding balance sheet of the group remains sound and solid with a nexus of long-term resources, notably thanks to a strong and highly diversified deposit base, high quality reserves, and a limited reliance on short-term funding. The robustness of the liquidity profile has been further strengthened in Q3 with, on the one hand, a stable deposit base compared to end of June and, on the other hand, higher liquidity reserves, which are up 25 billion euros compared to last quarter. Overall, the loan-to-deposit ratio stands at 81% at group level, and the LTI ratio remains strong at 147, plus repayment of 5 billion euros of TLTRO into three. I will not comment slide 12, and let's now turn to the business performance, starting with French retail, slide 14. As stated during our Capital Market Day, please note that insurance is now reported with edgy network and private banking. On the credit side, Total loan outstanding is down minus 4% in Q3 versus last year, with differentiated trends between retail and corporate. Corporate activity remains resilient, with loans excluding PGE up plus 1% versus last year, driven by short-term loans. On state-guaranteed loans, outstanding has decreased from around €18 billion at the end of 2020 to €8.9 billion currently, down by minus 31% compared with Q3 last year. On loans to individuals, the group remains cautious with a continuing selective approach in home loan production, started being 22, which translates now to a decrease in home loan outstanding by minus 5% compared to Q3 last year. On the deposit side, Total outstanding are stable, that is Q2, with deposits still shifting from side deposits to term deposits. On savings, the group is experiencing growing assets under management. Private banking assets under management are up plus 5%, with net inflows of €0.6 billion. Life insurance outstanding is up plus 2%, to €132 billion, with gross inflows amounting to €2.6 billion. In France, the year-to-date net inflows amounting to €0.5 billion. Finally, premium increased by plus 4% in protection versus Q3 last year, with PMC Premier being up by 9% versus last year. Let's now focus on the French retail banking net interest income as close Slide 15. As you can see, and as already stated since the beginning of the year, we have reached, in Q3, the peak of the negative impact of short-term hedges on NII put in place until early 2022. For 2023, we now expect the NII to be down by more than 20 percent compared to 2022. Starting with a slight increase expected in Q4, At constant balance sheet and rate environment, we expect the NII to progressively improve over the coming quarter to reach in 2024 a level at least equal to its level in 2022. Note that this projection is based on assumptions consistent with our current economic scenario, which was slightly updated since the Capital Market Day. In terms of NII sensitivity, It has evolved since the capital market day, following next up carried out things. It's now around plus 20 million euros in year one and around plus 40 million euros in year two for a 10 basis points rate increase. It remains stable at around 30 million euros for a move of 1 billion euros in such deposits.

Moving on to Boursaubon, which changed its brand name during the quarter, slide 16.