Societe Generale SA

Good morning, everyone. Thank you for joining the conference call today. We are pleased to present the sister general group's results for the second quarter. They reflect the sustained improvement in profitability and the right pace towards the delivery of our financial targets. The group's net income improves by 24% compared to last year, and it stands at 1.1 billion in Q2-24, equivalent to a quarterly ROTI of 7.4%. The cost-income ratio is improving as well at 68.4% for the quarter and 71.6% for the half-year, moving us closer to our annual targets. Revenues are up 6 percent compared to last year, and this outcome is driven by an overall robust performance of most businesses with, once again, an excellent quarter in global banking and investment solutions, sustained performance of our international retail banking, and higher margins at events. In France, NII is improving quarter after quarter, but it is facing headwinds coming from an increased share of interest-bearing deposits and a slower loan origination in a muted environment. We have maintained a strict cost management, allowing for strong positive draws in Q2-24, and cost of risk is in line with the target at 26 basis points in Q2-24. Regarding liquidity and capital, the bank maintains very strong ratios at 152 percent for the LCR at the end of June, and 13.1 percent for the CET-1 ratio, post-distribution provision of 91 cents per share. Furthermore, we move forward in an orderly and efficient manner with the implementation of our strategic roadmap with the sustained development of Boursauban in particular, which has reached now the 6.5 million clients mark. Launch of the first phase for 1 billion euro investment dedicated to the energy transition. We continue to simplify our business portfolio and we execute a strategic plan in order to build a more profitable bank, and create more value over the long term for all our stakeholders. Claire will now give you some more details of the financial performance. Claire.

Thank you, Slavomir. Let's start on slide five with the operating performance of the quarter. As illustrated in the chart, group revenues increased by 6.3% in Q2, as of last year, to reach 6.7 billion euros. They are up by nearly 3% for the first six months versus last year. In French retail, NII has increased by 10% compared with Q2 last year and by 9% versus Q1. Fees remain solid and up 2.3% at pillar level in Q2, excluding client acquisition costs at Boursaubourg. Overall, revenues of the pillar are up by 1.1 percent compared to last year and by almost 6 percent versus Q1. On global banking and investor solutions, the level of activity remains strong across businesses. Revenues are up by 10 percent versus last year at 2.6 billion euros. This growth in revenues is notably driven by global markets and transaction banking, which once again posted excellent results with double-digit revenue growth in both cases. Regarding mobility, international retail banking and financial services, revenues are slightly down by 2.3% versus Q2 due to negative base effects at event level linked to non-recruiting items by around 200 million euros. Excluding this effect, performance was good on mobility. It's improving quarter on quarter with an increase in margin and still good UCS results per car, which are however normalizing as expected. On their side, international retail banks posted sustained revenues. On costs, operating expenses are slightly up at 4.6 billion euros, notably due to perimeter effects linked to Lisplan and Berstein for 104 million euros. Excluding this effect, the cost base is almost stable, including around €80 million increase in variable items related to performance. Once again, it illustrates our disciplined cost management in a still inflationary context. Overall, the cost income landed 68.4% in Q2. It's down both versus last quarter and past quarter. Let's now move on to slide six on cost of risk. At group level, the cost of risk is stable at 26 basis points in Q2 versus Q1, in line with expectations, despite additional impact of market size in France. Excluding these size, cost of risk would have been around 18 basis points at group level. For the quarter, the cost of risk amounts to 387 million euros. between €501 million of Stage 3 provisions and a reversal of €113 million in Stage 1 and 2. The NPL ratio remains low at 3%, first application of IFRS 5 on entities for sale. Adjusted for NPL sales made in Q2 but settled in beginning of Q3, the pro forma ratio is boldly stable at around 2.9%. the net coverage ratio remains high at 80 percent. Last, provisions on stage one and two assets stay at high level at 3.2 billion euros, first application since Q1 of IFRS 5 norm on assets classified as health sale. Let's now turn to capital, slide seven. The quarter one ratio lands at 13.1 percent in Q2, i.e. around 285 basis points above MDA. It's slightly down compared with previous quarters due to two main impacts that were expected. First, the creation of Gostin in April with an impact of six basis points on the capital ratio in Q2. Second, regulatory impacts representing 12 basis points this quarter, it almost entirely leads to an on-site inspection made by the ECB on hybrids. At the end of June, around 20 basis points of regulatory impact have been recognized since the beginning of the year. At the same time, the group generated 12 basis points of capital for the earnings, plus distribution provisions. At the end of Q2, the total RWE amounted to 389 billion euros, Given those elements, we now expect the Q1 ratio to be above 13% at the end of the year. The other capital ratios remain comfortably above requirements. Few words now on liquidity, slide eight. The liquidity profile of the group is sound and very robust. It was further strengthened in the last quarter. Deposits grew by around 2% compared to Q1, thanks to granular inflows spread across most businesses. Overall, the loan-to-deposit ratio stands at 75% at group level. Regarding liquidity reserves, they are up by almost €10 billion as of last quarter and amount to €326 billion at the end of June. The LCR ratio remains strong at 152% as well as the NSFR ratio at €118 post repayment of €7 billion of GSTRO in Q2. It represents in both cases around €100 billion of losses. Last, it's important to remind that around 85% of the 24 funding program has already been achieved at the end of July. I will not comment slide 9. And let's now have a look on the business performance, starting with France Retail on slide 11. In Q2, market environment remained subdued on the loan front due to a more uncertain and latency context for the solution. In that context, loan outstanding decreased by €2 billion in Q1. That is Q1. It was mostly driven by home loans, despite a continued rebound in production by around 50% versus due to last year, but at a level that remains around 65% below the average quarterly volume in 2021. With corporates, loans outstanding remain stable, excluding state-guaranteed loans, which decreased by €3 billion compared with last year. On the deposit fund, net inflows were positive by €2 billion versus Q1. The increase in outstanding was however driven by interest-bearing products contributing to a further increase in deposit beta. In private banking, AUM reached the record level at €152 billion at the end of March. Assets are up 6 percent compared with last year, thanks to robust inflows of €2.2 billion in Q2. On insurance, life insurance outstandings are up 7% versus last year, to a record €143 billion. Growth inflows amounted to €5.3 billion, which represents an increase by nearly 70% compared to last year. it's important to remind that these strong inflows will translate over time into higher revenues in line with the new IFRS 17 norm. Last, risk-life and P&C premium increased by 3 percent. That is the second quarter of last year. Let's now turn to slide 12 on NII. In Q2, NIA increased by more than 10 percent compared with last year, and 9 percent versus Q1. As indicated last quarter, NIA in French retail was impacted for the last time in Q2 by the negative carry of the short-term until early 2022 for an amount of around €150 million. However, NIA growth has been mitigated by headwinds. On one hand, the higher deposit beta than expected due to the strong inflows towards interest-bearing products, which rose by around €4 billion versus Q1. Overall, this represents an impact of around €115 million versus the forecast we made after Q1. On the other hand, market environment was muted on loans with subdued demand. For that reason, we have adopted a prudent origination policy in a context of high competition despite the macro environment. As for deposits, we have adjusted downwards our estimates regarding NIIM loans by around €150 million, this is two ones, based on revised projections. Only now, we now estimate that the NII of the French retail activities will be around 3.8 billion euros in 2024, based on updated projections. A few words now on Boursaubonc on slide 13. In Q2, Boursaubonc once again maintained a high acquisition pace with more than 300,000 new clients. In line with our trajectory, we proactively decided to limit growth at this high level after two quarters of very strong client acquisition. It has contributed to decrease in acquisition costs by 14% versus Q1. At the end of June, more than 6.5 million people in France were clients of Bourgeois. At the same time, assets under administration reached 61 billion euros in Q2, thanks to strong inflows both on deposits and life insurance. On loans, the rebound prediction was confirmed in Q2 with a 21% increase in average versus Q1. All in all, on slide 14, total revenues of the PILAR are 1% in Q2 last year and by almost 6% compared with Q1. Regarding costs, they are up 2% versus Q2 on a reported basis. However, adjusted from one of the counted and disclosed in Q2 23, they are down by 1.7%. The cost of risk has improved compared with Q1 at 29 basis points. It is still impacted by specific market files. Restated from those five, the cost of risk in France would have been around 16 basis points. Overall, the group net income of the PILA amounts to 236 million euros in Q2. Turning to global markets and investor services on slide 15. Overall, total revenues are up 14 percent on the back of another excellent performance of market activities, whose revenues increased by 16 percent at nearly 1.6 billion euros in a conducive environment. Equities performed very well across the board, with a sharp increase in revenues of 24 percent versus Q2 last year, thanks to high volumes. On fixed income, revenues are up 3 percent versus last year, with on one hand strong client demand in investment solutions But on the other hand, low activity in flow and hedging, with tighter spreads in rates and low volatility on foreign exchange. Regarding security services, revenues are up 1%, with a good momentum on fee generation, offsetting the impact of the NII of the end of the remuneration of mandatory reserves. On financing and advisory, slide 16. Revenues are up 3% versus due to last year at 879 million euros, with a stable contribution at high level for global banking and advisory, and a continued strong performance of transaction banking, whose revenues increased by 14% versus last year, thanks to interest rate levels and active commercial development across the board. On global banking and advisory, we can highlight an excellent quarter in securitization and a strong rebound in IBD. Overall, slide 17, this is once again an excellent quarter for DBIS with high positive jobs. Revenues landed about 2.6 billion euros in Q2. It represents an increase by 10% versus last year, while costs remained broadly stable at the same time at 1.6 billion euros. This translates into a reported cost-income ratio of 63%. Cost of risk remained low at five basis points. Overall, TBI has delivered a very strong quarter with an RO&E above 20% and a net contribution of 770 million euros. Let's now move to international retail banking, slide 18. Once again, the division had a solid commercial activity across regions. In Europe, loans and deposits were up 6% and 8% respectively, compared to last year, at constant change and perimeters. The trend was also good in Africa, as loans are up 2% on average and deposits by 4% at constant change and perimeters. In terms of revenues of our international retail banks, they increased by 3% versus last year at constant change and perimeters. Turning now to mobility and living services, slide 19. On events, revenues are down by 4% compared to Q2 last year on a reported basis. It includes both perimeter effects linked to the integration of Lisplon and strong negative base effects versus Q2 last year. On a sequential basis, which gives a better picture of the current underlying performance of Avon, revenues are up by 5% versus Q1, restated from non-recurring items. From a commercial standpoint, Margins have reached 539 basis points in Q2 compared to 522 basis points in Q1. In parallel, the UCS result per vehicle is normalizing as expected. Excluding the impact of the reduction in depreciation costs and PPA, it amounted to €1,480 on average per vehicle in Q2 versus €1,661 in Q1. This is in line with our full-year target. At the same time, the integration of this plan is progressing well. Realized synergies have increased to 47 million euros at the end of June, a progression in line with the 112 million euros expected for the full year. On consumer finance, the environment remains challenging, notably in France. Loan outstanding decreased by 4% on the one-year comparison, and margins are still impacted by the effect of the usury rate on loans originated until last year. Overall, revenues are down by 5% since Q2 last year. And last, equipment finance posted stable revenues in Q2. Overall, on slide 20, the PILA contributed to the group net income for €360 million in Q2, with a cost-income ratio of 58.8%. To conclude, let's move on to slide 21 with the corporate center. Revenues are mostly composed of the cost of carry linked to the management of the group's buffers and structural risks. The improvement versus last year is mainly due to a base effect related to negative legacy one-offs disclosed last year. Overall, the net contribution of the corporate center is negative by around €200 million in Q2, such as minus €472 million last year. Flavio?

Thank you, Claire. A few words now on the latest milestones in our ESG roadmap. We continue to innovate for our clients and to support them in their strategic transition investments, and we are recognized for this leadership. We have been rated the world's leading bank by Moody's ESG and ranked the best bank in terms of transition strategy by Euromoney for the third consecutive year. We have exceeded our €300 billion target in terms of sustainable finance contribution with 18 months still to go. And we announced the project to acquire a majority stake in Reed Management, an alternative asset manager with the ambition to support emerging leaders of the energy transition through direct equity participations. This is a key component of the Euro 1 billion energy transition investment, which we presented at the Capital Markets Day. And it positions us as a key player in this growing market segment. On the last slide, which is now a useful one, we show our progress towards our targets, both 24 and 26. And the speakers speak for themselves, so I will not comment further. Let's now have our Q&A session and please speak to our usual rule of two questions per person.