News: Société Générale announces 2026 Strategic Plan; intends to reduce Oil & Gas exposure by 80%

By Matheiu Rosemain (Reuters) -- Societe Generale's (SOGN.PA) shares plunged more than 9% on Monday after France's third-biggest listed bank said it expected little if any growth in annual sales over the coming years in a keenly-awaited strategic plan from its new CEO.

Monday's plan, which had been touted by the bank for months, did not live up to expectations, analysts said, voicing disappointment on a wide range of issues including growth projections, prospects for dividends and a lack of detail on asset sales.

Return on tangible equity (ROTE), a key profitability target, was a shade below the bank's previous one, as was its shareholder payout goal. And, while its cost cutting target was more ambitious, it saw annual revenue growth of just 0-2% from 2022-26.

"We are negatively surprised by lack of revenue growth, increased capital target, payout & ROTE cut, and by the lack of details," Jefferies analysts said in a note.

Krupa shrugged off the negative market reaction, defending his choice to set conservative targets to cement his credibility.

"It's the right plan for the bank for decades to come," he told reporters, stressing that delivering on targets "was key" for him, after, he said, the bank had often failed to convince markets on that front.

"This is the best, most honest assumption about what we think we will deliver," he told analysts.

There would be "no sense whatsoever to come up here and target something that will raise questions ... that's not how I work," he said, adding: "We have thought abut this extremely carefully."

Shares, which dropped at the open, remained sharply lower after his comments. They were down 9.5% at 1030 GMT, wiping about 2 billion euros ($2.1 billion) off the bank's market value.

SocGen's challenges highlight the predicament of French banks, which tend to benefit later than European peers from interest rate rises because of the dominance of fixed-rate mortgages in France and government limits on passing on rate hikes - a particular problem as the global economy struggles.

SocGen now targets a 9-10% ROTE in 2026, and paying out 40-50% of reported net income to shareholders in dividends and buybacks from 2023 onwards. It had previously expected ROTE to reach about 10% in 2025 and a payout ratio of 50%.

Underwhelming

Krupa, a SocGen veteran whose track record leading its investment bank - where he cut risk-taking and costs - helped him win the tight race to lead the group, said he would streamline the bank's activities, but didn't elaborate.

"We will strengthen the group by shaping a simplified business portfolio, while taking the right actions to build-up capital and increase flexibility, structurally improve our operating leverage and maintain our best-in-class risk management", he said in a statement.

The share price decline put SocGen on course for the biggest one-day drop since March.

Exane called the goals "underwhelming," while JP Morgan analysts said in a note the targets were below consensus in terms of revenue expectations but that they welcomed the focus on cost and a "prudent approach on revenues".

"It will take time for the shares to discount the cost improvement given SG's mixed track record," they said. "The new CEO will have to earn investor goodwill through delivery."

Krupa vowed to cut costs by 1.7 billion euros by 2026 compared to 2022, 40% of which are new gross savings beyond already announced synergies, notably from the merger of SocGen's two retail brands in France.

The bank didn't give any update on the potential sale of non-core assets after Krupa said last month he intended to run a "tight ship" in terms of the bank's portfolio.

Krupa acknowledged this would be frustrating for some, but said it wasn't in the bank's best interest to tag specific assets for sale.

SocGen has said it will sell four units in Africa and review a fifth one on the continent. It is also open to a sale of its equipment finance unit, sources have told Reuters.

The bank said the new strategy would lead to write-downs for the remaining part of its African, Mediterranean and Overseas activities, as well as its Equipment Finance division, worth a total of about 340 million euros.

It also said it would reduce its exposure to upstream oil and gas businesses by 80% by 2030 when compared to 2019.

SocGen trades at about a third of its book value, almost on par with Deutsche Bank (DBKGn.DE) but half the multiple of its bigger BNP Paribas and Italy's UniCredit (CRDI.MI).

To read the full announcement, click here.

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About Societe Generale

Societe Generale is a top tier European Bank with 117,000 employees serving 25 million clients in more than 60 countries across the world. We have been supporting the development of our economies for nearly 160 years, providing our corporate, institutional, and individual clients with a wide array of value-added advisory and financial solutions. Our long-lasting and trusted relationships with the clients, our cutting-edge expertise, our unique innovation, our ESG capabilities and leading franchises are part of our DNA and serve our most essential objective - to deliver sustainable value creation for all our stakeholders.

The Group runs three complementary sets of businesses, embedding ESG offerings for all its clients: 

• French Retail Banking, with leading retail bank SG and insurance franchise, premium private banking services, and the leading digital Bank Boursorama. 
• Global Banking and Investor Solutions, a top tier wholesale bank offering tailored-made solutions with distinctive global leadership in Equity Derivatives, Structured Finance and ESG.
• International Retail, Mobility & Leasing Services, comprising well-established universal banks (in Czech Republic, Romania and several African countries), and ALD / LeasePlan, a global player in sustainable mobility.

Committed to building together with its clients a better and sustainable future, Societe Generale aims to be a leading partner in the environmental transition and sustainability overall. The Group is included in the principal socially responsible investment indices: DJSI (Europe), FTSE4Good (Global and Europe), Bloomberg Gender-Equality Index, Refinitiv Diversity and Inclusion Index, Euronext Vigeo (Europe and Eurozone), STOXX Global ESG Leaders indexes, and the MSCI Low Carbon Leaders Index (World and Europe).