French banks warn on country's 'difficult' economy
French lender Societe Generale (Euronext Paris: GLE-FR) posted a 56 percent rise in third quarter net profit on Thursday, to 836 million euros ($1.04 billion), in spite of what the bank's deputy chief executive described as a "difficult environment."
This sentiment was backed by the CEO of rival Credit Agricole (Euronext Paris: ACA-FR) who criticized a "lack of coherence" in French economic policy.
SocGen's net profit figures beat estimates from analysts polled by Reuters of 794 million euros. However, revenues slipped in the same period, down 1.8 percent at 5.9 billion euros, slightly above analysts' forecasts.
Deputy chief executive Severin Cabannes told CNBC that the results were solid in the quarter "despite a difficult environment" and said the bank's business model was "well adapted to this context."
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He gave three reasons why the group saw such a rise in profit. "Firstly, we had a good commercial dynamic across all our businesses, secondly we had a strict control of all our costs which decreased in absolute terms compared to last year and third, we had a sharp drop in the cost of risk as anticipated."
Loan loss provisions were down by 41 percent and provisions for litigation remained at 900 million euros.
The latest figures come after the lender, which is France's second-largest by market value, reported a 7.8 percent rise in net profits, to 1.030 billion ($1.38 billion) in the second quarter , and increased its litigation provisions.
Elsewhere Thursday, French bank Credit Agricole also reported an increase in third-quarter net profit to 758 million euros, up 4.1 percent year on year. Revenues rose 4.0 percent year-on-year in the same period to 4.0 billion euros.
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The bank said there was good business momentum and a continued fall in the cost of risk "despite a challenging economic, regulatory and fiscal environment," chief executive Jean-Paul Chifflet said in an earning's statement.
However, Chifflet added that a weakness in the French economy weighed on the business and criticized a "lack of coherence" in French economic policy.
Speaking to reporters in a conference call, Chifflet said "signs of recovery are proving elusive, unemployment is high, the real estate market is in correction, the public deficit continues to overshoot amid insufficient spending cuts," Reuters reported.
"The absence of a clear vision and lack of coherence in economic policies is weighing on confidence and therefore investment and economic activity," he added.
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The banks' earnings come at a time of increased concern in the euro zone area over the region's economic slowdown and falling inflation. The data is putting pressure on the European Central Bank (ECB) to consider further easing measures and investors are eagerly awaiting the conclusion of the ECB's meeting on Thursday.
Cabannes said the ECB was "doing the right job" and that its president Mario Draghi could be relied upon.
"Mr Draghi said clearly that he will do what needs to be done to sustain the growth recovery in Europe and if you look at what the European Central Bank has done over the last period of time, we can trust him," he told CNBC.
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