Société Générale issues profit warning

The bank said its fourth quarter was affected by a difficult environment in the world capital markets, which will cause a decline in revenues in its activity of global markets and services investment.

SocGen said it expects its 2018 revenues to be 10% lower and it expects its risk cost to be within the range of 0.2% to 0.25%, as forecast last year.

A dividend for 2018 was proposed of €2.20 per share and shareholders have the option to collect the dividend in shares.

The CET 1 ratio is expected at 11.4-11.6% including 26 basis points for disposals and 26bp from the stock dividend, assuming 50% share take-up.

The French bank was not the only one suffering the wild markets in their fourth quarter, with JPMorgan and Goldman Sachs both missing analyst estimates for trading revenue when they reported their results this week, while Citigroup reported a 21% slide in fixed-income trading.

SocGen will report its fourth quarter and full-year results on 7 February.

Looking at the dividend, analysts at RBC Capital Markets said that, assuming a 60% take-up of the dividend in shares at a 10% discount, "we calculate a 5% EPS dilution, but this depends on the take-up in shares... a 100% take-up in shares at 10% discount would lead to an 8% dilution".

With the CET 1 ratio expected at 11.4-11.6%, RBC said this would suggest it came out at 10.9-11.2%, down from 11.2% at the end of Q3.

"The 2018 stock dividend will have the largest impact on our estimates. The issue is that it now makes a stock option more likely in the next years," the analysts said.

Consensus pre results forecasted a 2020 CET 1 ratio of 11.9%, while RBC said the full year 2018 stock dividend on a 50% take-up should bring the estimate closer to 12%.