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SocGen Sets Goals for Higher Profitability, Dividend

Societe Generale CEO Frederic Oudea
“The group is now fully ready to deliver profitable growth in the future by taking advantage of its strengths,” Societe Generale SA Chief Executive Officer Frederic Oudea said in the statement. Photographer: Balint Porneczi/Bloomberg

Societe Generale SA, France’s second-largest bank, set out plans to increase profitability and boost its dividend over the next three years, and said Russia will contribute to its growth.

Societe Generale is “fit to take advantage of the opportunities in a still challenging environment,” Chief Executive Officer Frederic Oudea said in an interview with Bloomberg Television. “We are ready to grow.”

Societe Generale is targeting a return on equity, a measure of profitability, of more than 10 percent by 2016, up from 8.4 percent last year, excluding certain items. The dividend payout will rise to 50 percent of profit for the next two years from 40 percent for 2014, the Paris-based bank said.

Europe’s biggest banks have struggled to boost profitability as regulators demanded bigger capital buffers following the financial crisis and the region’s economy sputtered. Societe Generale is looking to Russia to bolster consumer-banking growth, a week after writing down the value of its business there by 525 million euros ($720 million) amid the escalating crisis over Ukraine.

Societe Generale sees consumer-banking revenue in both Russia, its second-largest market by clients, and in Africa increasing 7 percent annually over the next three years, outpacing 1 percent growth at its French branch networks. Companywide, it’s targeting revenue growth of 3 percent annually through 2016.

Possible Purchases

Oudea, 50, also said at a press conference in Paris today that the bank has 4 billion euros to spend on potential consumer and private banking purchases through 2016. The funds may alternatively be used to boost growth internally, he said.

Societe Generale declined 1.4 percent to 43.69 euros by 1:11 p.m. in Paris trading, after initially rising as much as 1.7 percent. The stock has gained 3.4 percent this year.

The bank will seek 8 percent annual revenue growth over the three-year period at its corporate financing and advisory unit by “allocating more capital with a view to growing natural resources and structured financing activities,” it said. For its markets activities, the bank is targeting an increase in revenue of 1 percent a year through 2016, above the industry’s trends, it said.

Societe Generale reported last week that first-quarter profit fell 13 percent, hurt by the Russia writedown. The bank sees its Russian operations contributing 5 percent of group earnings in 2016, excluding exceptional items. That compares with about 4.3 percent last year, based on data on the company’s website. It is targeting an ROE of 14 percent from its Russian consumer banking activities in 2016.

The European Union imposed sanctions on companies in Crimea for the first time yesterday and threatened more measures, along with the U.S., to target Russian industries.

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