Fitch Affirms Societe Generale at 'A-, keep Outlook Stable
Fitch Ratings has affirmed Societe Generale S.A.'s (SG) Long-Term Issuer Default Rating (IDR) at 'A-' and Viability Rating (VR) at 'a-'. The Outlook on the Long-Term IDR is Stable.
Fitch has withdrawn SG's Support Rating of '5' and Support Rating Floor of 'No Floor' and Franfinance S.A.'s and Compagnie Generale de Location d'Equipements S.A's (CGLE) Support Ratings of '1' as they are no longer relevant to the agency's coverage following the publication of its updated Bank Rating Criteria on 12 November 2021 and Non-Bank Financial Institutions Rating Criteria on 31 January 2022.
In line with the updated criteria, Fitch has assigned SG a Government Support Rating (GSR) of 'No Support' (ns). Fitch also assigned Franfinance and CGLE Shareholder Support Ratings (SSR) of 'a-', in line with the updated Non-Bank Financial Institutions Rating Criteria.
Fitch said that SG's ratings primarily reflect the group's adequate capitalisation and a more variable earnings and execution record than large French and higher-rated global trading and universal bank (GTUB) peers'.
The SG's diversified business profile, albeit with a significant contribution from more volatile capital-market activities, and moderate risk appetite support the ratings. Asset quality is satisfactory following gradual improvements but remains a rating weakness relative to higher rated peers'.
Diversified Business Profile: SG has a diversified business profile with strong franchises in key activities. The bank's reliance on earnings from corporate and investment banking (CIB) and capital-market businesses is higher than for most large French banks', partly explaining its more volatile performance in recent years.
SG has the fourth-largest market position in retail- and commercial-banking in France.
Its profitable retail-banking activities in Czech Republic, Romania and in French-speaking African countries, and its growing leasing and consumer-finance activities, provide good earnings diversification.
While more variable than higher rated peers over the longer run, SG's execution record has improved since the 2020 trough with marked progress on the repositioning of its CIB and the ongoing merger of its two French retail banking networks.
Moderate Asset-Quality Risks: SG has a higher impaired loans ratio than higher-rated French and European peers, although it has improved materially on more active management of its impaired loan stock and tighter underwriting standards.
Fitch expects SG's impaired loans ratio to remain contained at below 4% in 2022 and 2023, despite moderate risks from lending to small French companies, African retail banking and CIB, which are the main sources of impaired loan inflows.
