Societe Generale SA

Ladies and gentlemen, welcome to the CCTA General First Quarter 2025 Results Conference Call. I now hand over to Mr. Slava Merkupa, Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining us today. I am very pleased to be here with you to present, together with Leo, our first quarter results. I am happy with our performance this quarter. and I am proud of the work and commitment from all of the SG teams. We still have a lot of work ahead of us, but our renewed ability to execute consistently and with discipline makes me confident that we will continue to build on our strong momentum. The environment is uncertain for sure, and our progress will not always advance in a straight line, but it will be consistent and predictable. We have taken what was once merely our aspirations and transformed them into a tangible execution track record. Since the CMD, the results we deliver continue to get better. Our strategy is paying off. Revenues are up by 10%, excluding asset disposals. This is above our full-year target of more than 3% growth. We committed. to at least a 1% cost reduction excluding disposals, the reality is we did better than that, reducing costs by more than 4% in Q1. As a result, we reached a cost-to-income of 65% this quarter. This compares with our target of less than 66% by year-end. That's an improvement of 10 percentage points versus Q1 24. In addition, if the taxes that are entirely accounted for in Q1 were spread equally during the year, the cost-to-income ratio would stand at 62% this quarter. Our cost of risk is low and remains below our guidance range at 23 basis points. Leo will give you more details, but I would like to flag that it includes an increase in our S-1 provisions, reflecting our cautious stance in the current context. And all this leads to a sharp improvement in our ROTI that has climbed to 11%, well ahead of our end-of-year guidance of more than 8%. If we restate from around €200 million of gains on asset disposals booked this quarter, and if we consider a quarterly linear distribution of taxes, the ROTI remains at 10.9%, well above the guidance. And finally, and you know this is at the heart of our strategy, we have a strong capital position with a CET1 ratio of 13.4% post Basel IV implementation. Once again, ahead of our year-end target. This is a strong set of results. And as you will see on the next slide, we are in a good position to navigate in the current context. Risk management is crucial in our business, whatever the environment. And if we filter out the daily noise and focus on what matters here, a couple things could happen. The first is a global macroeconomic slowdown linked to the disruption of the international trade order. And the second is prolonged market volatility linked to the deep uncertainty. These two factors could trigger a multitude of scenarios. But whichever one ultimately emerges, we are confident in our ability to successfully navigate through it. And my confidence stems from three of our strengths. First is our capital position, with the CTO on ratio at 13.4%, which translates into a buffer of around 320 basis points over MDA. Second is our diversification. We are a very diversified bank in terms of revenue sources, in terms of geographies. And by the way, as you can see, many of our core countries are among the least affected by the tariffs risk. And in terms of industry sector, with a maximum sector concentration of 3.2% of our EAD and an average of 2.7% for the top five sectors. Third is risk management. We have a strong track record in terms of credit risk management. And within our market activities, we're benefiting from the deep repositioning and restructuring we did four years ago. As a matter of strategic policy, we maintain in this business a low-risk profile as we maintain our focus on stable client revenue generation at a fraction of the risks we used to take on. After a month operating in the current climate, we can make two key statements. One, we don't see any signs at this point of deterioration in our asset quality, and we have a robust inventory of S1-S2 provisions that we just further increase. Two, market volatility has been rather supportive so far, and we remain confident in the future performance of the global markets business. Finally, I think it's also very important to stress that in the current environment, the need for what we provide will not change. Financing, hedging, mobility services, and advisory services across the board. New opportunities arise, particularly within Europe, and we are well-positioned to capture them. Now let me hand over to Leo to go through the Q1 25 financial performance.

Thank you, Salvador Meira, and good morning, everyone. Moving on with the presentation in slide six, we show the key drivers of our strong revenue growth in Q1 25. The group reported a solid 6.6 increase in revenues versus Q1 24, and growth is even higher at 10.2 percent when adjusting for 2024 asset disposals. which amounts to 219 million euros, mainly Morocco's gap for private banking, both in Switzerland and the UK. Excluding these disposals, this is comparing the same perimeter, revenues in French retail, private banking, and insurance increased by 16.5 percent, while if we also exclude the drag on short-term hedges in Q124, the increase stands at 2.5 percent, supported by fee income. Revenues at global banking and investor solutions increased by 10 percent over Q124, driven by conducive market conditions, particularly in equities as well as in financing and advisory. Lastly, revenues in mobility, international retail banking and financial services grew by circa 0.8 percent versus Q124, again, when excluding disposals. Turning to the next slide, you can see the achieved cost reduction in the quarter, driven by the improvement in all our operating leverages. Expenses fall by 7.6 percent between Q124 and Q125, confirming our firm cost discipline. This is equivalent to minus 4.4 percent reduction, including disposals. The reduction is driven by lower transformation charges by 278 million euros as guided, which upsets the increase in the following perimeter and inflationary elements. On the one hand, we had higher taxes on higher variable competition in 2024, which accounted for 29 million euros. This is the last quarter of the Bernstein perimeter impact, which is 22 million euros, given that it was not part of the banking Q1 24. And M&A transaction costs stand at 5 million euros. As a result, we managed to improve the operating leverage of all businesses, as shown on the right-hand side of the slide, with particular attention to RPBI's evolution, which reduces its cost-to-income by 18 percentage points. The group cost-to-income ratio, as Slavoj Mir was commenting before, falls 10 percentage points, from 75 percent in Q124 to 65 percent in Q125, ahead of our 66 percent Moving on to asset quality, in slide eight, the cost of risk in Q125 remains contained at 23 basis points, in line with last quarter's, and four basis points below Q124. This quarter was largely driven by state's free provisions, which account for 330 million euros out of the total 344 million euros charges in Q125. total standing Stage 1 and Stage 2 provisions remain high at 3.1 billion euros. The balance is stable from the last quarter and falls slightly from Q1-24 due to asset disposals, mainly Morocco and SCEF. Stage 2 provisions in particular represent 4.7 percent of the corresponding Stage 2 stock of loans. The asset quality remains sound, with NPL ratio at 2.82 percent in Q1-25, and stable from last quarter. And also, the net coverage ratio stays solid at 82 percent in Q1, up one percentage point from Q4-24. Let's now turn to capital in slide nine, where we can see our strong organic capital generation capacity. The C2-1 ratio reached 13.4 percent in Q1-25, which is 300 in basis points above MDA. It represents an increase of 10 basis points versus the end of 2024, having observed this quarter the Basel IV impact. This 10 basis point increase is explained from left to right in the slide by return earnings, which represent 18 basis points after a current 50 percent payout. The positive impact from asset disposals, which are 43 basis points this quarter, which includes SGAF as well as private banking in Switzerland and the U.K. While, on the other hand, the implementation of positive four had a negative impact with 48 basis points as guided. And finally, other impacts are broadly neutral this quarter with a two basis point impact. Once again, a strong capital ratio sits comfortably above 13 percent of the target, which shows a disciplined and strong capital management quarter after quarter. In addition, as you can see at the bottom right-hand side of the slide, all capital ratios are comparably above the regulatory requirements. Let's review the liquidity profile of the group in slide 10. We have a strong liquidity profile. LCR ratio stands at 140 percent, and end-to-end ratio is 115 percent at the end of Q125. Both ratios are well above regulatory requirements. Moreover, liquidity reserves are at 316 billion euros, with 53 percent of them being cash at central banks. 54% of our long-term funding program has already been executed, including most of the subordinated issuances, on the back of strong ratings from all agencies. The deposit base remains granular and diversified. It decreased by around 3% from last quarter, in line with our steering targets and strained management of liquidity buffers. And finally, the loan-to-deposit ratio stands at 77% at group level. In slide 11, we show a summary of the P&L for the group, which we will cover in more detail in the next slides. Let's move then to the business performance on slide 13, starting with stock chains, network, private banking, and insurance. In Q125, loans outstanding decreased by 3 percent compared with last year, or by minus 1.8 percent if we exclude state-guaranteed loans, BGEs. This said, Home loan production is increasing strongly this quarter, thanks to a strong commercial momentum, and it's up 115 percent versus the figures of Q1-24. Deposits are broadly stable, easing only minus 1 percent versus Q1-24, which is reflected in the continued shift of inflows to private banking and life insurance products. As a matter of fact, in this regard, AUMs in private banking represent 130 billion euros, having increased by 6 percent versus Q1-24, if we're just for other disposals, or 4 billion this first quarter. On the other hand, life insurance outstanding grew by 5 percent versus Q1-24, reaching 148 billion euros, thanks to the continuation of a strong influx. It actually increases 2 billion euros in the quarter. Moving on to Bolsa Bank. Once again, in Q1, the bank maintained a high acquisition pace, gathering 458,000 new clients and reaching 7.6 million total clients. In terms of client satisfaction, BursaBank remains number one in the French banking sector and was also recognized as best digital bank in France in January this year. At the same time, assets under administration, this is deposits and financial savings, improved further by 15 percent versus Q1 24, reaching a total of 67 billion which shows that Bursa's bank deposit gathering remains very strong. Similarly, gross inflows in life insurance increased by 25 percent from Q1-24, with a high share of unit-linked products representing 57 percent of the total. Note that the bank posted a new quarterly record in brokerage volumes, with 3 million market orders executed in Q1-25. On the lending side, total outstanding loans grew by 7 percent versus Q1-24. Moving to the pillar level for French retail, private banking, and insurance on slide 15. I would like to stress the very positive evolution of the cost-income ratio, which goes down 18 percentage points from 86 percent in Q124 to 68 percent in Q125. This movement is driven by the sound 16.5 increase in revenues when excluding disposals and the strict cost management seen in the total expenses decrease of 6.6 percent again, on excluded disposals. In the bottom part of the P&L, we can see the cost of risk came at 29 basis points, significantly lower than the 41 basis points in Q124. All this translates into a net income of 421 million euros, equivalent to a RONI of 9.5 percent for the quarter. Turning now onto markets, global markets and investor services on slide 16. We report another solid quarter with Q1-25 total revenues for GIMIS up 10% from Q1-24. Starting with global markets, we had a strong Q1, both versus an already high base in Q1-24. This can be seen in the 10.9% increase in revenues, which reached 1.8 billion euros. Equities in particular posted a record quarter. with revenues up by 22% versus Q124. The sound performance was supported by the increased volatility during the quarter, which drove an increase in client flows. And we saw particularly high volumes on equity-listed products and flows activities. Client volumes remained also strong in derivatives, supporting a strong performance this quarter as well. Pre-revenues fell by 2.4% versus Q124 on the back of lower client activity and rates on rates investment solutions. The performance this quarter also reflects some margin compression in financing activities. Having said that, we do note that foreign rate flow performed well, benefiting from the increased volatility in the market. Lastly, in security services, revenues grew slightly by 1.4 percent, supported by strong fund distribution rates. Let's move on to slide 17. Financial advisory delivered a strong quarter with total revenues of 972 million euros, up 10% versus Q124. Global banking and advisory performed well with revenues up 10.5% versus Q124, notably thanks to a robust performance in asset finance, steady results in asset-backed products despite less conducive market conditions, and resilient performance in M&A and DCM. Transaction banking revenues grew by 8.7%, thanks to a solid organic wealth of payment volumes with institutional clients and good commercial performance on the corporate franchise. All in all, GBIS had another sound quarter, with total revenues reaching $2.9 billion and growing 10 percent versus Q124. We maintained a strong cost discipline, keeping expenses flat in the quarter, and this combination translates into a sound positive jobs. Again, the cost-to-income ratio decreased by six percentage points from 67 in Q1 24 to the current 61 in Q1 25. The cost of risk remained low at 13 basis points, and as a result of all this, GBIS delivered a net income contribution of 856 million euros in the quarter, equivalent to a 18.7 percent growth. Focusing now on international retail. Overall, revenues grew by 2 percent in Q1 compared to Q1-24 at constant exchange rates and perimeter. And this was driven by the strong performance in Europe, where we saw loans up by 6 percent versus Q1-24, notably in home loans, while deposits increased slightly by 1 percent, driven by Romania. Revenues growth was robust, up 5 percent thanks to both NII entries. Performance in Africa has been more stable. Loans were broadly flat year-on-year, the mixed momentum across geographies. Outstanding deposits, on the other hand, grew by 2 percent, driven by site deposits from corporate clients. Turning now to mobility and financial services, Avian's revenues were stable versus Q124, with increasing margins. Earning assets grew by 1.4 percent. Margins increased by 40 basis points to 562 basis points. And both drivers upset the continued expected normalization of used car sales results per unit, which fell to 1,229 euros versus 1,661 euros in Q1-24. Cost-to-income ratio stands at 58%, which is well in line with the guidance for 2025. On the other hand, consumer finance revenues were stable in Q1-25, with loans still falling by 3%, but at a slower pace. All in all, the pillar of mobility, international retail, and financial services posted an increase in net income of 14.5 percent, or 24.4 percent when adjusting the perimeter, reaching a RONI of 11.2 percent in 2025. This reflects disciplined cost management and lower cost of risk. The cost-to-income ratio improved three percentage points from 62.5 in Q1-24 to the current 59 percent in Q1-25. Revenue grew 1.1 percent at constant perimeter and exchange rate, driven by international retail in Europe, while they're down 7.4 percent versus the full numbers in Q1-24 because of the perimeter changes. Costs decreased slightly, reaping the benefits from a strict discipline, 4.8 percent at constant perimeter and exchange rate. And the cost of risk of 31 basis points in Q1, it's down from 43 basis points in Q1-25. To conclude on the financial performance, let's move to slide 22 with corporate central. In Q1-25, corporate central was close to break-even with a net profit of 12 million euros. And this benefited from, on the one hand, the negative results in NBI, which improved versus Q1-24, thanks to management actions and to a more efficient use of excess liquidity, Operating expenses, which far from Q1, due to lower transformation charges. And in addition, in Q125, it includes the accounting impacts from asset disposals of the SCEF and private banking in Switzerland and the UK. This was booked in the net profits or other losses from other assets line, and it amounted to 200 million euros. I will now give back the floor to Sal.