BUY SOCGEN: BIG Q4 beat. Better trading,CIB, French retail on fire and dividend confirmed. 5% not bad in this environment!
Socgen has underperformed the sector by more than 10% YTD with litigation concerns, an unknown Basel impact and poor retail and CIB performance masking a considerable discount to the SOTP. But now post these great numbers the risks are now well understood and being ticked off one by one.
From here we should also get litigation settlement in H1 , which wont affect the dividend at 5%. We now have a sensible plan that focuses on cost synergies as opposed to revenue growth and therefore leaves the group less exposed to uncontrollable factor dependent on the cycle.
We also have some certainty now around Basel, the impact of which is more benign than it might have been, and wont affect GLEs ability to pay dividends either, thanks to the implementation timeline and scope for national discretion.
French Macro is also flying. All time highs in PMIs and cycle highs in industrial production paint a positive picture for labour, wage growth and inflation. All things that will benefit the stock going forward. STRONG BUY