More Progress At Societe Generale, But Long-Term Core Growth Remains A Key Challenge

Societe Generale (OTCPK:SCGLY) has continued to outperform its peers since my last update, outperforming other European stocks by about 2%, bringing its trailing one-year outperformance to around 15%. I believe much of this performance has been tied to the relatively quick progress management has made with shoring up the capital position, though some improvement in the French retail business certainly hasn’t hurt.

This French bank remains a challenging bank to recommend, though I do believe it is still undervalued. The company’s efforts to improve its capital ratios have very likely added to the bank’s long-term growth challenges, though markets like Russia and Africa can still offer some upside. Improved visibility on lower capital requirements could help support the shares this year, and expectations are still relatively low, but investors shouldn’t overlook facts like the bank’s inability to earn its cost of equity, nor management’s ongoing downward revisions to ROTE expectations.

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More Progress At Societe Generale, But Long-Term Core Growth Remains A Key Challenge