SCGLY - Société Générale: Renewed Enthusiasm But Familiar Problems

• Societe Generale posted its fourth straight significant and higher-quality quarterly beat. Revenue and profit leverage was strong across the business, and pre-provision profits were more than half the beat.
• Management is taking another crack at improving the French retail operations, merging the Societe Generale and Credit du Nord operations, and focusing on driving more profitable growth from Boursorama.
• Management is also taking another crack at improving the results from the value-destroying GBIS, including stricter cost containment efforts and refocusing on higher-return operations like structured finance.
• I'm not expecting major rate leverage from SocGen, but ongoing macroeconomic improvements in its core markets and further execution on cost/efficiency efforts can drive profit growth.
• A 4% long-term core earnings growth rate, with ROEs in the mid-single-digits, and a roughly 7% near-term ROTE can support double-digit appreciation over the near term and long term.

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