Thursday’s earnings for Europe’s top banks, Société Générale & Commerzbank, exceed last year’s profits
Photo: Commerzbank AG
Société Générale beat expectations for the fourth quarter with cash dividend of €1.2 a share for 2014, and a promise to raise the dividend payout to 50% next year. Fourth-quarter revenue was up by 7.5% to €6.12 billion from €5.70 billion in the same period last year.
Profits amounting to €215 million reversed the €182 million loss of a year ago, but were below analysts’ expectations of approximately €560 million.
The largest drop seen for the French bank was as owner of the Russian bank Rosbank where €11 million net loss was posted in the fourth quarter. Société Générale has already cut funding to Rosbank by €600 million and as deputy chief executive Bernardo Sanchez Incera said, ““We have significantly tightened our conditions for granting loans in Russia.”
The bank also put aside an additional €400 million for litigation costs, a practice that is becoming more common in banks, raising total legal funding to €1.1 billion in the quarter.
Stock price made an immediate jump on market opening from 35.69 to 37.20, with current market capitalization running at about €29 billion.
Meanwhile in Germany, Commerzbank posted an increase in Q4 profit. Quarterly net profit swelled to €77 million, compared to €64 million a year ago. Analysts were expecting a profit of €58.5 million.
Revenue dropped to €2.19 billion from €2.23 billion, whilst operating profit increased from €90 million to €98 million. Another drop was seen in loan-loss provisions down to €308 million from €451 million.
Stephan Engels, CFO at Commerzbank reported, “In 2014 we strengthened our capital base and further reduced risks. In our run-down segment we were able to significantly lower the portfolios and the risk-weighted assets. In addition we have increased our common regulatory equity capital by approximately EUR 900 million and improved the corresponding core equity ratio to 9.5%. Last year we were also able to significantly improve the leverage ratio to 3.7%. We have now also set ourselves a target for this for the end of 2016: we intend to increase the ratio with full application of Basel 3 to approximately 4%.”
Markets initially shunned the German bank with trading down over 1% on Wednesday, however, a slight retrace on Thursday brings share price to the 11.24 mark.
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