(Bloomberg) -- Societe Generale SA’s domestic retail unit continued to be a drag on the bank even as the trading business outperformed.
The bank on Thursday cut its full-year guidance for net interest income at that unit by about €300 million ($324 million) as it’s facing subdued loan demand. Clients are also shifting their money into higher-yielding accounts, which means SocGen has to pay them more for depositing their money with it.
The unit has been suffering from ill-timed hedging decisions made a couple of years ago. Those hedges won’t impact the business any further as they have matured in May, Chief Financial Officer Claire Dumas said on a call with reporters.
SocGen’s shares dropped as much as 6.9%. Its stock is now down about 6% since the beginning of the year, making it one of the worst performers across European lenders.
Still, income from the trading of equities, a key unit for SocGen, jumped 24% to €989 million ($1.1 billion) in the three months through June, beating estimates. That compares to an average gain of 18% across Wall Street’s biggest banks, though it’s behind the 57% gain posted by cross-town rival BNP Paribas SA last month.
The strong performance allows the bank to anticipate trading revenue that could surpass €5.4 billion this year, the top of the range it previously indicated, Chief Executive Officer Slawomir Krupa said on the call.
More than one year into the top job, Krupa is advancing with his plan to streamline SocGen and cut costs to shore up capital and boost its lagging share price. After cutting about 900 jobs at its headquarters in Paris and offloading its Moroccan and equipment finance units, the bank is in advanced talks with Credit Agricole SA to sell German consumer finance business Hanseatic Bank.
The bank’s net interest income in France rebounded from a year earlier, gaining 10% in the second quarter.
The lender’s financing and advisory unit saw its revenue gain 3% to €879 million, above estimates.
The bank’s cost-to-income ratio, which the lender aims to bring below 71% for the year, was at 68.4% in the second quarter.
The CET1 ratio, a key measure of its financial strength, stood at 13.1% as of end June. SocGen said it expects the metric to be above 13% at the end of the year.
--With assistance from Donal Griffin.
(Updates with share price movement in fourth paragraph)
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