Turnaround Hopes Lift SocGen to 2011 Highs Ahead of 2Q Report
SocGen shares have had a stellar start to the year, rising 92% as investors see the bank boosting its profitability and shareholder payouts after successfully strengthening its balance sheet.
'Regulatory constraints on capital are set to ease on SocGen and investors are therefore speculating that the bank could announce buybacks tomorrow,' said Gilles Guibout, head of European equities at AXA IM.
The group, headquartered in the business district of La Defense in Paris, has been busy disposing of non-core assets and cutting costs. Its price-to-book value, which still prices at about half the average level of its European peers, doubled to 0.6 from 0.3 at the beginning of the year.
'It's one of the few banks trading below book value in Europe so there's hopes its valuation could catch up further,' Guibout added. The European banking sector currently trades at 1.1 book value.
Banks overall in Europe are having a superb run, with the Stoxx 600 Banks Index up 38% since the start of the year, the best performing sector in the region. Investors are piling into banks amid resilient earnings and attractive shareholders returns.
For now, the strong run at SocGen vindicates the CEO's strategy revamp, which had initially sent the stock down 12% when it was unveiled in September 2023. At 12:39 in Paris, the stock was up 1.2% at €52.3, set to close at high unseen since September 2009.
High expectations may however weigh on the shares on Thursday.
'The bar is set quite high for these results,' said Antonio Roman, Portfolio Manager at Axiom Alternative Investments.
'There's some expectations that they might be able to increase their return on equity targets and there will be pressure for them to beat expectations on cost cutting and most business lines, particularly in French retail,' he added.
--With assistance from Claudia Cohen.
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