Sunday, December 9, 2018

Societe Generale Going Nowhere Fast

There are a few exceptions here and there, but you can’t really win a game by playing defense. Societe Generale management (OTCPK:SCGLY) (SOGN.PA) has had to spend a lot of time cleaning up past messes, but the reality is that the multiple disposals needed to shore up capital have compromised revenue growth. Coupled with a very challenging core French retail banking market, Societe Generale is going nowhere fast and it’s increasingly difficult to see how that changes, as ongoing investments in IT aren’t likely to drive meaningful outperformance.

Societe Generale shares continue to trade at what may look like an unreasonably-low price/TBV, but this bank doesn’t earn its cost of equity capital and doesn’t seem very likely to do so over the next decade. That doesn’t mean that there may not be value here, but it’s hard to get very bullish about a perennial underperformer that simply lacks impressive earnings growth drivers.

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Societe Generale Going Nowhere Fast

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