The Frustrating Wait Goes On For Societe Generale To Be Rewarded For Its Progress

I’ve been critical, sometimes sharply so, of Société Générale (OTCPK:SCGLF) over the years, as the company stumbled from one partially successful restructuring effort to another, but despite evidence of real progress at this large French bank, the market just doesn’t care. The shares have fallen almost by half since my last write-up, despite better-than-average performance in core banking and capital markets operations.

Progress is a relative term, though, and this is still a bank that will be earning single-digit returns on tangible equity for at least a few more years, and as U.S. investors have seen with Citigroup (C), the market is not particularly eager to reward under-earning banks with material reratings. The low level of expectations built into the valuation today suggests patient shareholders could be well rewarded down the line, but “how far down the line” is a very fair question to ask, and Societe Generale may yet struggle to establish itself as more than a trailing rival in the majority of its key markets.

 

Continue reading here: 

The Frustrating Wait Goes On For Societe Generale To Be Rewarded For Its Progress

Quarter By Quarter, Outperformance Is Building Société Générale's Credibility

 

After more than a lost decade, Société Générale (OTCPK:SCGLY) ("SocGen") is really starting to deliver on a self-improvement and build (or perhaps "rebuild") credibility with investors. There are still a lot of issues left to tackle, including low intrinsic profitability, but management has key businesses like French Retail on a better path and a plan in place for operations like the global trading and flow lending operations that have been long-term laggards. Along the way, management has shown that it's willing to be opportunistic - negotiating with ING (ING) on their French retail operations and purchasing LeasePlan through its ALD subsidiary.

Low expectations are still an asset when it comes to evaluating SocGen's investment prospects. Low single-digit core earnings growth can still support a healthy return from these shares, even after a 27% move since my last update (outperforming European peers by about 10%). SocGen's market share prospects in French Retail and ability to really turn around the trading and advisory operations are valid concerns, but I'd say the risk/reward balance still favors SocGen shares at these levels.

Read the full article here: 

 Quarter By Quarter, Outperformance Is Building Société Générale's Credibility

Société Générale: Renewed Enthusiasm, But Familiar Problems

 

In the year or so since I last wrote on Société Générale (OTCPK:SCGLY) ("SocGen") sentiment has most definitely shifted. The stock is almost double where it was before, as are sell-side price targets, and analysts seem a lot more bullish about management's ability to finally hit its cost reduction and return improvement targets.

As I said in that last piece, SocGen was trading on very very low expectations, and it hasn't taken a particularly large swing in terms of long-term ROE outlook to drive these higher fair values. And to be fair to management, there has been progress on business improvement initiatives in at least some businesses. Still, this is a company with a lot of work still in front of it and it seems unlikely that rates will be a big near-term help.

I do believe that SocGen is undervalued, and I believe any "going concern" risk is gone. What remains, though, are some very real questions about whether management can improve the business enough to ever get ROEs back above the cost of equity capital, and whether they are prepared to make some hard choices to get out of chronically-underperforming businesses. I'm more bullish than I've been in a while, and it only takes around 4% long-term growth off the not-so-impressive base of 2019 earnings to drive double-digit return potential here.

 

Click the link to continue reading: 

Société Générale: Renewed Enthusiasm, But Familiar Problems

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.

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

Societe Generale In A Position To Switch From Stabilization To Actual Growth

Shareholders of Societe Generale (OTCPK:SCGLY) (“SocGen”) have endured more than a decade of substandard performance, with the bank underperforming not only relative to other French banks like BNP Paribas (OTCQX:BNPQY) and Credit Agricole (OTCPK:CRARY), but to a wider set of quality European banks as well. SocGen’s problems have been legion, putting the company into a very poor capital position and necessitating numerous defensive asset sales and restructuring efforts.

At long last, though, there are more than just signs of progress. SocGen’s capital improvement in the third quarter may have been helped by timing factors, but the bank’s capital position is nevertheless in a much better place and most of the heavy lifting on restructuring is likely done. If SocGen can avoid any major missteps, and if the global economy doesn’t deteriorate too much from here, this long-troubled bank may finally be in a position to go from defense to perhaps actually pursuing growth again.

Read more here:
Societe Generale In A Position To Switch From Stabilization To Actual Growth

Expectations For Societe Generale Have Dropped To A Point Where Outperformance Seems More Likely

There’s long been a line of thought in investing that there’s a price where almost any stock can be attractive, provided the business is a going concern. I don’t quite believe that (I’ve seen stocks languish for a decade or more), but I do believe that Societe Generale (OTCPK:SCGLY) has shored up its capital position and has finally started tackling some of its more significant lingering operational problems.

Even for a bank that generates such low returns, SocGen shares look undervalued, and I believe the expectations bar has been set so low for this bank that the odds favor some level of outperformance. The macro environment is a risk, particularly with the ECB now going back to easing, but it looks to me as though European banks in general, and SocGen in particular, has derated to a point where just “okay” performance would generate some upside.

Continue here:
Expectations For Societe Generale Have Dropped To A Point Where Outperformance Seems More Likely

Société Générale: Beats On Capital, But The Growth Costs Are More Evident

With banks there’s a tradeoff between shoring up capital and achieving earnings growth – when companies have to build up their capital position, it comes at the cost of growth, and that’s what’s happening with France’s Societe Generale (OTCPK:SCGLY) now. Years of underperformance in core banking, and financial services, coupled with large legal settlements, have left the bank’s capital in precarious shape, forcing management to shore up capital at the cost of growth.

The good news is that expectations are exceptionally low now. If SocGen can somehow generate just low single-digit earnings growth without having to conduct a capital raise, the shares are meaningfully undervalued. The bad news is that SocGen has been losing share in France, chronically missing its own internal targets, and may find itself forced to sell one of its more attractive assets to shore up capital if this latest plan doesn’t work out.

Click here to continue:
Société Générale: Beats On Capital, But The Growth Costs Are More Evident

Societe Generale's Ongoing Operating Malaise Still Weighs On The Valuation

I’ve flagged France’s Societe Generale (OTCPK:SCGLY) (“SocGen”) as a potential value trap for some time now, despite its low valuation and my own ownership of some shares, and the shares have borne that out – the local shares are down about 40% over the last year (the ADRs are down about 45%), underperforming French peers like BNP Paribas (OTCQX:BNPQY), Natixis (OTCPK:NTXFF), and Credit Agricole (OTCPK:CRARY), not to mention a host of European peers.

Although SocGen still appears significantly undervalued on many metrics, the fact is that the company’s performance continues to be uninspiringly weak and it’s difficult to see how management will change that in the foreseeable future. While very patient, very long-term-oriented investors may still find some value here, and valuation may well be bottoming out, the company’s ongoing restructuring efforts will continue to create headwinds for revenue and profit growth.

Read more here:
Societe Generale's Ongoing Operating Malaise Still Weighs On The Valuation

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.

Click here for more:
Societe Generale Going Nowhere Fast

Societe Generale Still Treading Water And Going Nowhere Fast

French banking giant Societe Generale (OTCPK:SCGLY) continues to post the sort of performance that puts the stock firmly in the “cheap for a reason” camp. Although second quarter results were better than expected pretty much across the board, the core results weren’t as strong and the company is falling short of its own modest targets. Although the stock sports a high yield, low multiples, and very low expectations, it’s tough to see what will break this company out of its malaise short of another turnover in management or a more serious merger approach from a company like UniCredit (OTCPK:UNCRY).

Click here for more:
Societe Generale Still Treading Water And Going Nowhere Fast

Societe Generale's Ongoing Stumbles And Struggles Explain The Value Gap

Savvy, attentive investors can find bargains in the market, but it is usually a good idea to stop and ask why a given stock appears undervalued, as not all cheap-looking stocks are bargains. France's Societe Generale (OTCPK:SCGLY) is a case in point. A turnaround story that just won't turn around, Societe Generale continues to produce "it's always something quarters" that leave the market and investors disappointed.

At this point, it is difficult to come up with compelling reasons to own Societe Generale beyond its low apparent valuation and the prospect that these ongoing struggles might prompt a more dramatic rethinking of the company's strategy. That said, the company's prominent position in France likely limits how much activist investors can accomplish, and likewise any M&A activity may be challenging if Societe Generale isn't in the driver's seat. While these shares do appear to have double-digit upside, the company has really done nothing to engender trust in its ability to meet even modest long-term growth expectations.

Read the full article here:
Societe Generale's Ongoing Stumbles And Struggles Explain The Value Gap

Geared To Growth, Societe Generale's New Plan Doesn't Offer Much That's New

Between disappointing third quarter earnings and a new multiyear strategic plan that I believe many investors found underwhelming, Societe Generale (OTCPK:SCGLY) (GLE.FR) has seen its shares pressured once again. Although there have been some signs of life in this French bank’s international operations, the domestic operations have been lackluster, as have the capital markets businesses. Still, this is a bank that is structurally geared toward growth, and if economic growth does in fact pick up across Europe, Societe Generale may yet hit its long-awaited 10%-plus ROE target and unlock meaningful value.

Read more here:
Geared To Growth, Societe Generale's New Plan Doesn't Offer Much That's New

To Get Its Due, Societe Generale Has To Do Better

French multinational bank Societe Generale (OTCPK:SCGLY) continues to test investor patience with its slow turnaround. While the share price has improved over the past couple of years, the company's return on equity and return on tangible equity remain frustratingly low due to persistently high costs, recent challenges in its CIB operations, and foreign operations that until recently weren't carrying their weight.

SocGen is still somewhat undervalued on the basis of what I don't regard as especially ambitious assumptions, and the shares still yield more than 4%. What's more, key markets like France, the Czech Republic, Russia, and Romania are improving, and management is expected to unveil a new strategy for growth in November that will restore some investor enthusiasm.

Follow the link for more:
To Get Its Due, Societe Generale Has To Do Better

Seeking Alpha: Societe Generale Not Getting Its Due

It's been a disappointing summer and fall for European bank stocks, and despite two solid quarters with double-digit earnings beats, Societe Generale (OTCPK:SCGLY) (GLE.FR) has been unable to beat that trend in European bank stocks. While the shares haven't done as badly as names like Credit Agricole (OTCPK:CRARY) (down about 24%), Banco Bilbao (NYSE:BBVA) (down about 25%), or UniCredit (OTCPK:UNCFF) (down 20%), SocGen is still down about 6% from my last update.

I believe this performance has created a more interesting gap between the bank's current price and long-term potential. The world has certainly changed for large banks, and the higher capital levels that regulators are demanding will make it much harder (if not impossible) to achieve past high-water marks in ROE/ROTE/ROA. What's more, I wouldn't say that Western Europe is quite the picture of economic health yet, and Russia still has the potential to get worse before it gets any better. All of that said, I think SocGen has made underrated progress with its French retail operations, its retail operations outside of France, and with its overall costs and capital allocation. I believe that fair value for the ADRs is around $11.50 to $12.50, making these shares a more interesting consideration particularly when including the dividend.

Read more here:
Societe Generale Not Getting Its Due

Seeking Alpha: UniCredit Needs Help To Be Better

Regular readers of my work will know that I have a certain affection for tangled, messed up, trainwreck-y stories, as I often find a lot of value in stories that are too ugly, too complicated, or too time-consuming to get a lot of attention from institutional investors.

I think that's an apt lead-in for UniCredit SpA (OTCPK:UNCFF), as this large pan-European bank continues to work through a lot of the lingering damage of the European banking sector meltdown. A year ago I didn't see all that much surplus value in the shares and they have only appreciated about 6% since then (the local shares; because of currency the ADRs are down closer to 20%).

Unfortunately, I still don't see a lot of value unless and until the bank can drive its ROE above 12% again - and despite its high-quality operations across Central and Eastern Europe, that could take quite a bit longer to achieve.

Read the full article here:
UniCredit Needs Help To Be Better

Seeking Alpha: Societe Generale Improving, But Still Unsettled On Several Fronts

ADRs are a very useful way of adding global exposure to a portfolio, but there can be that frustrating dichotomy between local performance and your actual results when currency moves get in the way. Such is the case with Societe Generale (OTCPK:SCGLY). While this giant French bank has put at least some of its troubles behind it and gotten some appreciation for that in the market since my last article (the local shares are up more than 25%), the ADRs have only posted a mid-single digit gain.

I continue to believe that SocGen can do better and merit a higher valuation, but there are still some significant challenges to surmount. SocGen needs to reignite growth in its French Retail operations and manage through the extreme challenges it is facing in its Russian operations, while also building the groundwork for future growth in areas like Africa. I believe the bank will fare better than the Street expects, but not all investors may see the 10% to 20% potential return as compelling enough to take on the currency risks, regulatory risks, and other assorted headaches that may accompany SocGen.

Read the full article:
Societe Generale Improving, But Still Unsettled On Several Fronts

Seeking Alpha: Fear Once Again Driving Societe Generale Shares

Sometimes it seems like French banking giant Societe Generale (OTCPK:SCGLY) can't catch a break. Management lays out ambitious expense and return targets, and analysts don't buy it … until they actually start delivering. Management lays out a strategy to grow assets and revenue in international markets like Africa, and analysts don't buy it. But when speculation arises that Russia could expropriate the company's assets and/or that the U.S. will slam the company with fines, that they choose to believe.

To be sure, the threat of significant business disruptions to SocGen's Russian operations is real. Likewise, it seems improbable that BNP Paribas (OTC:BNPZY) would get hit with fines and SocGen would get by unscathed. All of that said, the shares still seem to discount a double-digit ROE in 2018, even though management is doing a good job of delivering on its targets.

Read the full article here:
Fear Once Again Driving Societe Generale Shares

Seeking Alpha: Societe Generale Continues To Grind Forward

The last three months haven't been the easiest stretch for Western European banks, and Societe Generale (OTCPK:SCGLY) is down around 6% over that stretch. BNP Paribas (OTCQX:BNPQY) has been even weaker (down more than 10%), while Credit Agricole (OTCPK:CRARY), UniCredit (OTCPK:UNCFF), Credit Suisse (CS) and many others have done better but are still down over that short stretch.

Not all that much has changed, but banks have moved to a different part of the recovery phase. First quarter results were pretty "meh," including those at Societe Generale. The stories have shifted from significant cost of equity and balance sheet improvements to slower, grind-it-out return on equity improvements. I continue to believe that Societe Generale is undervalued and one of the more attractively-priced large bank stories today, but it's going to take time and the Street still isn't convinced that Societe Generale is going to produce the double-digit ROE on schedule and/or improve its lagging Russian operations.

Read more here:
Societe Generale Continues To Grind Forward

Seeking Alpha: UniCredit's Valuation Seems Fair Given The Potential And The Risks

Like other European banks badly damaged in the credit crisis and the deep recession that followed, UniCredit SpA (OTCPK:UNCFF) has faced a difficult road back to normalcy. The company has had to turn to highly dilutive financing to stay in business and conditions in the company's core Italian market have not really improved all that quickly. Even so, the company's shares have followed a similar trajectory to damaged-but-not-dead European banks like Societe Generale (OTCPK:SCGLY), Santander (SAN), and Intesa Sanpaolo (OTCPK:ISNPY), with the stock up about 47% over the past year and over 130% over the past two years.

UniCredit is a challenging case from a valuation perspective. The company's sizable exposure to Central and Eastern Europe (or CEE), which includes Russia and Turkey, is a major potential growth driver, as would be an economic recovery in Italy. Management has laid out ambitious goals for 2018, but I believe they are achievable. Unfortunately, the shares just don't look all that cheap today and Societe Generale may well still be the better option.

Investors considering these shares should note that the U.S. ADR has limited and erratic liquidity. Investing in the Milan-listed shares (RIC: CRDI.MI, BBG: UCG.IM) will offer more consistent liquidity.

Click here to continue:
UniCredit's Valuation Seems Fair Given The Potential And The Risks

Seeking Alpha: Like The Black Knight, Societe Generale Isn't Dead Yet

French-based multinational bank Societe Generale (OTCPK:SCGLY) definitely got some parts lopped off during the credit crisis and European recession, but the bank has since proven that reports of its demise (or perpetual irrelevancy) were greatly exaggerated. The company's performance in 2013 was by no means flawless, and the company has much still to do, but patient shareholders have been rewarded with a nearly 70% rise over the past year and a 90% rise over the past two years.

Relative to distressed brethren like Citigroup (C), Bank of America (BAC), Santander (SAN), and HSBC (HSBC), Societe Generale has the best two-year performance of the lot, with only Bank of America coming close to challenging SocGen's return. Looking ahead, there is still a credible argument that SocGen can do better and see further re-rating. The company's ROE goal of 10% does not seem out of line and can underpin a $14 fair value, while outperformance in areas like Russia could offer some scope for upside.

Read more here:
Like The Black Knight, Societe Generale Isn't Dead Yet