Societe Generale SA

Ladies and gentlemen, welcome to the Societe Generale second quarter and half-year 2025 conference call. I now hand over to Mr. Slavomir Kupa, Chief Executive Officer. Sir, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us today for our H-1 results. I am delighted to present to you another strong set of results as well as an important new milestone in the execution of our strategic plan. Last quarter, we demonstrated that our continued improvement is sustainable, and we continue to perform ahead of our end-of-year targets. Through consistent organic capital generation, we have further strengthened our capital ratio. Our overall performance gives us the confidence to take two major steps forward in our commitments. We are upgrading our annual targets and we now expect a roti around 9% for 2025. And we are further improving shareholder return with today's announcement of our first ever exceptional distribution of a portion of our excess capital through an additional share buyback of 1 billion euro. This is an important first step. Additionally, we are introducing an interim dividend of 61 cents per share against the results of the first half of 2025. The unwavering dedication of our teams makes all this possible. We continue to execute our strategic roadmap with discipline and determination. And as a result, we are moving into the second phase of our three-year plan with equal confidence based on this year's first half results. Revenues increased by 8.6% versus H1-24, excluding asset disposals at a growth pace well above our initial target for 2025. Costs continue to decrease at a higher pace than initially planned. They are down 2.6% since the beginning of the year compared with last year, excluding asset disposals. This positive differential translates into a current group cost-to-income ratio of 64%, already below our initial annual target and roughly 7 percentage points better than last year. Asset quality remains strong, the cost of risks remains low, and below our annual guidance at 24 basis points for the first half. At this point, we see no signs of significant deterioration. And regardless, our assessment of the current environment keeps us prudent in terms of risk management. Together, all these factors contribute to a group ROTI of more than 10% at the end of the first half, with the group net income reaching €3.1 billion. This is well above our initial annual target. Ultimately, our capital ratio further increased by 10 basis points in Q2 2025, and the CET1 ratio now stands at 13.5% after accounting for the additional share buyback of €1 billion. Therefore, we have decided to upgrade our annual targets on cost-to-income and ROTI based on strong, positive jobs. Looking forward, we now expect a cost-to-income ratio below 65% in 2025 versus below 66% before, and as the cost-of-risk guidance remains unchanged, we now expect an annual ROTI around 9% in 2025. We're basing this decision to upgrade our targets in what we see in the numbers at the business level. We implemented our strategy through specific business initiatives, as you know, and which are delivering positive outcomes throughout the group. In French retail, private banking, and insurance, we are now pursuing a stronger strategic direction and renewed management practices, which leads to an increased commercial momentum and the opportunity to extract more synergies across the French retail businesses. This is boosting growth in mortgage origination, in fees, in private banking AUM, and in life insurance outstandings. At the same time, Boursaubanque has already reached 8 million clients 18 months ahead of our initial CMD target. It keeps delivering an improved financial performance which will accelerate next year. Our focus for the remainder of the year will be to maintain our current steady pace in terms of client acquisition. Overall, the RPVI RONI rose to 10.4% in H125 versus 3.3% in H124, and the cost-to-income ratio decreased to 67% versus 81% over the same periods. In global banking and investor solutions, we continue to deliver a high, consistent, stable, and predictable performance for the fifth year in a row within all our businesses, particularly within global markets. We have leading franchises in our global banking business that are well positioned across megatrends like infrastructure investments, energy transition, and defense. And overall, we continue to deliver leading profitability levels with a RONI of 17.7% in H125 post-Basel IV. In mobility, international retail banking, and financial services, profitability is up by more than two percentage points versus last year. Margin and synergies at events are also increasing. KB and BRD are performing very well and leverage a successful digital overhaul. At the same time, we continue to streamline our business portfolio with the closing of the disposal of our subsidiary in Burkina Faso and the announcement of the disposal of our subsidiary in Cameroon. Our CMD commitments were simple. Deliver value creation anchored in a strong capital position. We also committed to being good stewards of the capital of our shareholders. by being more efficient in terms of capital allocation across our businesses, by streamlining our portfolio through targeted disposals, and by improving, of course, our operating performance. The tight execution of this roadmap gives us today the ability to substantially enhance shareholder returns. In this first half, we brought our CET1 ratio to 13.8% at the end of June 2025 before excess capital distribution. and we are therefore announcing the first additional share buyback of €1 billion, which represents minus 25 basis points of CET1. And given that we have already received the ECB approval, it will be launched as soon as next Monday. As previously stated, we will continue to proactively manage our sustainable excess capital in the best interest of shareholders with a mix of exceptional distribution and profitable disciplined growth. We are also introducing an interim dividend from 2025 onwards, and we intend to distribute an interim cash dividend of 61 cents per share this year, representing 35 percent of the H-125 total distribution accrual. It will be paid on October 9th of this year. I now leave the floor to Leo, who is going to take you through our second quarter performance.

Thank you, Slavoj Mir, and good morning, everyone. Let us move on to the financial performance in Q2 2025. It is another strong quarter for the Group, which reports a Group net income of €1.5 billion, up 30.6% versus Q2 2024. This translates into a higher return on tangible equity of 9.7% versus the 7.4% that we had in Q2 2024. Going through Q2 2025's details, we can see a solid revenue growth of 7.1% versus Q2 2024, excluding disposals, driven by strong commercial performance across businesses, as we will see later. Reduced costs by minus 2.8 percent versus Q2-24, excluding the global employee ownership program and other disposals, showing our continued firm discipline on costs. Both movements translate into a further improvement in operational leverage, with a cost-to-income ratio of 63.8 percent in Q2-25, down by more than four percentage points versus Q2-24, achieved despite a one-off non-cash charge of €100 billion related to the launch of the Global Employee Share Ownership Programme in June 2025. As a quality-wise, the cost of risk continues to be low at 25 basis points, at the lower end of our guidance, between 25 and 30. In addition, as mentioned by Islam Amir, we continued to simplify our business portfolio with the closing of the disposal of sub-gen Burkina Faso and the announced sale of sub-gen Cameroon. Moving on with the presentation, on slide nine, we present the main drivers of our revenue growth in Q2-25. Disposed assets generated 342 million euros of revenues in Q2 last year, mainly Morocco, Madagascar, , and private banking in Switzerland and the U.K. Therefore, group revenues increased 1.6 percent versus Q2-24 on a reported basis, but 7.1 percent when adjusting for 2024's asset disposals. Revenues in French retail, private banking, and insurance increased by 10.7 percent, excluding disposals, and by 2.8 percent if we also restate the drug insurance in Q2.4. Revenues of global banking and investor solutions are up 0.7 percent versus their strong Q2.4 to reach a high level of 2.6 billion euros, driven by solid performance in fixed income, as well as in financial and advisory. Lastly, Revenues in mobility, international retail banking, and financial services grew by 7.3 percent versus Q2-24, excluding disposals, supported by the sustained growth of events, as we will see later. Continuing on the next slide, we can observe the ongoing improvement in our operating leverage. Total costs fall by 5.2 percent between Q2-24 and Q2-25, confirming our discipline on cost management. This is equivalent to a minus 2.8% reduction excluding both disposals on the charges related to GSOP launched in June 25 for an amount of 100 million euros. Discharge of GSOP is 100 million euros, is a non-cash item which therefore has no impact in CD1 nor on distributable net income as the P&L charge is upset by an equivalent positive impact in the equity. The decreasing cost is supported by 93 million euros of lower transformation charges, as expected, and net cost savings across the board representing 30 million euros. As a result, the operating leverage improved in all businesses, driven by both high revenues and decreasing costs, as shown on the right-hand side of the slide. Improvement is particularly relevant at FPBI, with a decrease of 12 percentage points from 77 percent last year to 65 percent in Q2-25. The group cost-to-income ratio falls 4 percentage points from 68 percent last year to the current 64 percent in Q2-25. Overall, we're very confident we will reach our new target of a cost-to-income ratio below 65 percent in 2025. Let us take a closer look at the ASA quality on slide 11. The cost of risk in Q2-25 remains low. of 25 basis points, which is at the lower end of our guidance, only two basis points higher than last quarter and minus one basis point below Q2-24. This quarter's cost of risk mainly comprises of Stage 3 provisions, which account for 390 million euros. In parallel, as you can see, total standing Stage 1 and Stage 2 provisions remain high at 3 billion euros, slightly down from Q1-25, mainly due to asset disposals and assets. Stage 2 provisions, in particular, represent 4.3% of the corresponding Stage 2 stock of loans. Asset quality is solid, with the MPL ratio at 2.77%, down 5 basis points from the previous quarter. And also, the net coverage ratio remains sound at 81% in Q2, down 1 percentage point from Q1, basically because of asset disposal. Let's now turn on to capital on the slide floor, where we can see our strong capital position evolution. This is the basis for the first distribution of excess capital, as mentioned earlier by Slavomir. The C2-1 ratio reached 13.5 percent of Q2-25. This is 330 basis points above MDA. This strong ratio is already net of the additional share by back of $1 billion, which corresponds to an impact of 25 basis points. All in all, we see the quarter a net increase of 35 basis points before the additional share buyback, or a net increase of 10 basis points after it, as explained from left to right in the slide. On the one hand, we can earnings contribute with 50 basis points, 15 basis points, after accruing a 50 percent payout. We have a positive impact from other proposals, not only related to the sale of Burkina Faso. some positive regulatory adjustments with an impact of eight basis points, and finally, other impacts which add two basis points. In addition, as you can see in the bottom right-hand side of the slide, all other capital ratios are comfortably above the regulatory requirements. We have the liquidity profile of the group on slide 13. Societe Generale maintains a strong liquidity profile with an LCR ratio at 148 percent at the end of Q2, and an NSVAR ratio at 117 percent, both well above regulatory requirements. Liquidity reserves stand at 313 billion euros in Q2, with a balanced mix between cash and securities. We've already executed around 80 percent of the long-term funding program, with good access to liquidity in all currencies, on the back of a strong long-term ratings from all agencies, including, as a novelty public quarter, the new stable outlook from Moody's. The deposit base remains strong, granular, and highly diversified. Overall, Loan 2 Depot stands at 77 percent for the group. In slide 14, we show a summary of the P&L of the group for Q2, which we will cover in more detail in the coming slides. Let's move now to the business performance on slide 16, starting with software network, private banking, and insurance. In Q2 25, loans outstanding decreased by 2 percent compared to last year. are flat when excluding state-guaranteed loans, while slightly up versus Q1-25. Home loan production continues to increase strongly in the quarter, thanks to a strong commercial momentum, and it is up by 175% versus Q2-24. As expected, volatile deposits are stabilizing, as well as the mix between site and term. They are slightly down 1% versus Q1-25. Linked to this deposit evolution, we can see that the strong momentum in asset gathering continues this quarter. On the one hand, we see AGM in private banking reaching 132 billion euros in Q2, increasing by 6% versus Q2 24, if we adjust for asset disposals, while outstandings are up by more than 2 billion when compared to Q1. On the other side, life insurance outstandings increased by 5% versus Q2 24, reaching a total of €150 billion. That also represents plus €2 billion versus Q1, thanks to continued strong interest. Moving now to BursaBank. Once again, in Q2, the bank maintained a high pace of acquisition, gathering 444,000 new clients. More importantly, it already reached the €8 million target in July. This is six quarters ahead of its December 26 objective. This growth is achieved together with the churn rate that remains below 4%. In terms of client service, Burjabank was recently recognized as the best digital bank in France by Euromoney. At the same time, asset standard administration improved further, reaching 70 billion euros. This shows that Burjabank as a gathering remains very strong, notably with deposits growing by 16% versus Q2 24. Similarly, life insurance outstanding increased by 7% versus Q2 24, with a high rate of unit-linked products, representing 48 percent of the total. Note also that Bursa Bank posted strong growth in market orders, plus 33 percent versus Q4-24, while finally, on the lending side, total loans outstanding grew by 10 percent versus Q2-24. Reviewing now the four pillar level for French retail, private banking, and insurance on slide 18, I would like to highlight once again the very positive evolution of the cost-to-income ratio, which falls more than 12 percentage points to 65.1 in the quarter. This is driven by the strong 10.7 percent increase in revenues, excluding disposals, and the strict cost discipline as demonstrated by the decrease in cost by minus 5.7 percent compared to Q2-24, again excluding disposals. Further down in the P&L, we see that the cost of risk came at 25 basis points, lower than the 29 that we had in Q2-24. Collectively, this results in a net income of €488 million in Q2-25, equivalent to a RONI of 11.2% of the quarter under Basel IV requirements, which compares to 5.7% last year under the previous Basel III. Turning now to global markets and investors' services on slide 19, Q2-25 total revenues for GMIS are stable versus Q2-24, which was particularly strong in our market businesses. Focusing on global markets, Q2-25 revenues increased slightly by 0.8 percent versus Q2-24, combining normalization in equity revenues and a reversed performance in FIC. On the equity revenue side, these were resilient in Q2-25, down by 2.9 versus Q2-24. Commercial activity remained sound in equity derivatives. It is very important to highlight the base effect in the comparative with Q2-24, where equities benefited from very high volumes across all activities. Indeed, Q2-24 was our best segment order since 2010 in this segment. TIC delivered a solid quarter with revenues increasing by 7.3 percent versus Q2.4, thanks to the robust performance in activities like flow and finance. We also benefited from strong commercial activity in a challenging economic environment where visibility and global micro prospects are uncertain. With that, TIC managed to mitigate the slowdown in derivatives. Lastly, in security services, revenues eased by 3.1 percent versus Q2.4, where the decrease in interest rates has impacted the steady commercial momentum in the quarter by SGSS. Let's move on to slide 20. Financial and advisory's total revenues are up by 1.3 percent versus Q2 24. Global banking and advisory continue to improve with revenues increasing by almost 4 percent. This good performance is largely driven by acquisition finance, fund financing, and infrastructure finance as well as a continued upward momentum in both originated and distributed volumes. In investment banking, ECM delivered a good performance in Q2-25, while ECM is showing encouraging signs of recovery in a market environment that is still challenging. Regarding transaction banking, revenues declined by 4.7% in Q2. Performance was impacted by the decrease in interest rates, offsetting the solid commercial activity with both corporate and institutional clients. Looking at the whole GBIS pillar on slide 21, we can see that overall GBIS maintains a solid performance with revenues reaching 2.6 billion euros in Q2 2025, slightly up versus, as mentioned, a very high Q2 2024. We keep up strong cost discipline with expenses down minus 1 percent in the quarter. The cost-to-income ratio decreased 1.1 percentage points from 62.7 percent in Q2 last year the current 61.6 percent. Cost of risk remained contained at 19 basis points in the quarter. As a result of all the previews, DBIS delivered net income contribution of 750 million euros in Q2-25, equivalent to a high RONI of 16.8 percent under Basel IV. Let's now move to international rating. Overall, revenues continue to increase this quarter. up by 2.7% compared to Q2-24 at constant exchange rate and perimeter. This is driven once again by the European businesses. In Europe, loans are up 7% while deposits remain stable versus Q2-24 at constant exchange rate and perimeter. Revenues, on the other hand, increased by 6% versus Q2-24, again at constant exchange rate and perimeter, supported by higher net income both in KB and BRD. In Africa, loans increased by 3 percent versus Q2-24 at constant exchange rate and perimeter. Given economic and political situations in certain countries, we observe a wait-and-see attitude in the corporate sector. On the other hand, deposits within the same perimeter grew 2 percent year-on-year. Revenues remained resilient, though, versus at high Q2-24, with an increase in net interest income of 3 percent versus Q2-24 at constant exchange rate and perimeter. Focusing now on mobility and financial services, the combined businesses posted a strong increase in revenues of 11.1 percent versus Q2 last year at constant exchange rates and perimeter. This is excluding, for example, the disposed gas. AVENS revenues improved externally by 10.6 percent. Margins increased to 550 basis points from 539 in Q2 last year. Revenues were supported by lower depreciation, and the UCS costs per unit are normalizing, but at still a slower pace than anticipated. They represented around €1,250 per vehicle versus the €1,480 per vehicle in Q2-24. Earning assets remain roughly stable at around €53 billion. On the back of proactive fleet management to favor profitability in core countries. On an underlying basis, excluding notably the fall in depreciation charges and Turkey hyperinflation adjustments, revenues fell by 3 percent versus Q2-24. Consumer finance performed very well this quarter, with revenues up by 12.6 percent versus Q2-24, benefiting from margin expansion and higher NII, mainly in France, as well as a minor positive impact from asset revaluation. We see positive growth jobs driven by higher revenues by 7.2 percent and decreasing costs down 4.2 percent versus Q2-24, both at constant perimeter and exchange rate, despite an inflationary context. These, once again, illustrate the strict cost discipline across the businesses. The cost of risk stands at 35 basis points, falling from the 45 basis points in Q2-24. So overall, the whole pillar of mobility, international retail banking, and financial services posted a net income of €404 million, up by 41% versus Q2-24, adjusting for the perimeter and exchange rates. Finally, the RONI improved four percentage points to 15.3% under Basel IV. To conclude now the financial performance, let's move to slide 25 with the corporate sentiment. NBI improved versus Q2-24, notably thanks to a proactive, efficient management of excess liquidity. Operating expenses include €100 billion related to the group employee share ownership program, which, as explained before, is a non-tax item and therefore does not affect CET1 nor shareholder distribution. In addition, Q2-25 includes notably the disposal of Burkina Faso, both in net profit or losses from other assets. It's not difficult to stop here.