Uncertain ratios

6 May 2015 By Dominic Elliott

Investors largely rewarded lenders whose Q1 results showed stronger balance sheets. They were tougher on those who backtracked, like Societe Generale, BNP Paribas and Deutsche. That disdain looks wise: in time banks will probably need to hold yet more equity against assets.

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Shares in Societe Generale fell 3 percent in morning trade on May 6. A rise in adjusted first-quarter net profit to 1.1 billion euros ($1.2 billion), from 415 million euros a year earlier, was offset by a drop in its leverage ratio and a rise in risk-weighted assets (RWAs).

The French bank’s common equity Tier 1 ratio was unchanged from the end of December at 10.1 percent, but its leverage ratio slipped 10 basis points to 3.7 percent.

SocGen’s RWAs rose 5 percent from the end of December, as it made more loans to corporate clients and the euro weakened against the dollar.

Shares in rival Credit Agricole were trading broadly flat by 1116 GMT on May 6 following a 2.6 percent rise in first-quarter net profit to 784 million euros.

France’s third-largest listed bank improved its leverage ratio by 20 basis points to 4.4 percent over the three months to March. However, its common equity Tier 1 ratio fell by the same amount to 10.2 percent.

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The French bank’s common equity Tier 1 ratio was unchanged from the end of December at 10.1 percent, but its leverage ratio slipped 10 basis points to 3.7 percent.

SocGen’s RWAs rose 5 percent from the end of December, as it made more loans to corporate clients and the euro weakened against the dollar.

Shares in rival Credit Agricole were trading broadly flat by 1116 GMT on May 6 following a 2.6 percent rise in first-quarter net profit to 784 million euros.

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