SocGen CEO: Russia is now normalizing

Russia showing signs of normalization: SocGen CEO
Russia showing signs of normalization: SocGen CEO   

French bank Societe Generale reported a fivefold increase in its first-quarter net income thanks to investment banking gains and a smaller hit from its struggling Russian unit.

The bank posted net income of 868 million euros ($972 million) for the first three months, up from 169 million in the same period of last year, when the company took a 525 million euro writedown on its Russian business.

The bank suffered a fresh 91 million euro loss in the reporting quarter on its Russian business as loan demand dropped in the country in the grips of a deep recession triggered by Western sanctions over the Ukraine crisis and lower oil prices.

Shares of the French lender have been hit over the last year by concerns over Russia, with Societe Generale having a strong exposure to that market.

However, Societe Generale CEO, Frederic Oudea, told CNBC that there are now signs of normalization for its Russian operations.

"Things are moving well," he said.

"In Russia, as expected, the quarter has been more difficult because households have stopped borrowing to buy cars. But I must say that we have seen, progressively, signs of normalization with interest rates going down, with the ruble improving versus the dollar."

Shares slipped on Wednesday morning as investors dumped its stock, which saw losses of 3.6 percent in the first hour of trading.

Societe Generale SA headquarters stand in Paris, France
Antoine Antoniol | Bloomberg | Getty Images
Societe Generale SA headquarters stand in Paris, France

Net banking income rose 12.3 percent to 6.353 billion euros with growth from corporate and investment banking up 21.8 percent, boosted by the weak euro and the full integration of its Newedge brokerage after buying last year the 50 percent it did not already own.

Revenues from equities trading jumped 32.5 percent as many markets reached record highs in the quarter, while growth in fixed income, foreign exchange and commodities trading offset weaker demand for structured products.

Oudea added that the company had good growth of revenues and good commercial dynamism and was pleased with the "overall performance" at the start of the year.

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"We are building robust business models suited for the new regulatory environment and we are capturing new clients," he said.

Credit Agricole reports

Buoyant investment banking operations also boosted the profits of fellow French lender Credit Agricole. The banking group reported a 2.6 percent rise in first-quarter net income on Wednesday, compared to the year before.

It highlighted that buoyant activity in all of its business lines and a further decrease in the cost of risk had boosted its revenues, which rose 3.1 percent to 8,035 million euros, compared to the same period last year.

Bernard Delpit, group chief financial officer, said the earnings were supported by a good business momentum and that the bank's expenses were under control.

"(The results) reflect good performance in our business lines that made up for the difficult interest rate situation in French retail banking.," he said in a conference call on Wednesday morning.

- Reuters contributed to this report.