On February 10, shareholders of Société Générale (SocGen) were still basking in sunshine. At EUR 37.68, the bank stock reached its highest level since the fall of 2018. The French large cap was pushed to the top by the annual figures published on the same day. CEO Frédéric Oudéa presented a record profit for 2021 and, at the same time, looked optimistically into the future. At this point, the experienced manager - Oudéa has been with the company since 1995 - could hardly have expected Russia to invade Ukraine two weeks later. However, SocGen shares turned downward the very day after the figures were published. But with the escalation, selling pressure increased massively - compared to the outlined top, the share slumped by more than half. The sell-off is probably also due to the French company's involvement in Russia. The balance sheet for 2021 includes the Moscow-based Rosbank with a book value of EUR 3.2 billion.
SocGen acquired a stake in the bank in 2006 and merged its Russian activities with Rosbank four years later. This chapter in the company's more than 160-year history is ending. On Monday, SocGen announced an orderly withdrawal from Russia. In addition to Rosbank, the French are selling its insurance subsidiaries to Interros Capital. The holding company belongs to the Russian billionaire Vladimir Potanin, the largest shareholder of the nickel group Norilsk Nickel. SocGen expects the transaction to occur in the coming weeks, and Rosbank will return to its original owner. Unsurprisingly, the trade is not without financial consequences for the French. In addition to a EUR 2 billion write-down on Rosbank's book value, this includes reducing the Common Equity Tier 1 ratio (CET 1 ratio) by around 0.2 percentage points.
Nevertheless, the stock market reacted positively to this announcement. The SocGen share started the trading week before Easter with a price increase of almost 5%. Quite a few investors are likely to be relieved that the bank is now escaping a difficult risk to calculate. At the end of 2021, SocGen's exposure to Russia totalled more than EUR 15 billion. According to the company, despite the charges from the sale, the CET 1 ratio will continue to exceed plans. As of 2021, this highly regarded ratio stood at 13.7%. According to the financial group, it was 470 basis points above the minimum regulatory requirement. France's third-largest listed bank has successively increased its hardcore capital (see chart). The Rosbank sale has no impact on the distribution policy for fiscal 2021. The Annual General Meeting on May 17 is to vote on a cash dividend of EUR 1.65 per share certificate. In addition, management is maintaining its share buyback program with around EUR 915 million.
Investors can also achieve attractive yields with Barrier Reverse Convertibles on SocGen. In addition, this structured product has a partial protection mechanism. Leonteq has relaunched two variants. In the product currency CHF the guaranteed coupon is 15.00% p.a., in EUR 15.20% p.a.. The barriers are uniformly set at 59% of the initial level. As long as the SocGen share does not fall to or below this level, the investment is redeemed after 15 months with the maximum return corresponding to the coupon. If, on the other hand, the underlying uses up the risk buffer, the partial protection expires. In this case, repayment would be linked to the performance of the SocGen share price. Please note: Due to the soft callable feature, early termination and redemption of this Barrier Reverse Convertible may occur.
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