UPDATE 3-SocGen's new boss vows to cut costs to boost profits by 2026
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First big markets test for CEO Krupa
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Pledges to streamline portfolio of assets
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Slightly lower targets on ROTE, payout ratio than before
(Adds analyst in paragraph 6, previous targets in 4, shares in 7, background throughout)
By Mathieu Rosemain
LONDON, Sept 18 (Reuters) - Societe Generale's new CEO pledged on Monday to cut costs to boost profits by 2026, in a keenly-awaited plan to revive France's third-largest bank that forecast little if any growth in sales.
Slawomir Krupa, who took the helm in May, said he aimed to build a "rock solid" bank and set achievable goals in a challenging environment marked by slowing economic growth.
The bank said it would target a 9-10% return on tangible equity ratio (ROTE) in 2026, up from the 5.6% reported at the end of June. It will also pay out 40-50% of reported net income to shareholders in dividends and buybacks from 2024 onwards.
Both targets are slightly below previous pledges that saw ROTE reaching about 10% in 2025 and a payout ratio of 50%.
It also said its new targets were based on annual revenue growth expectations between zero and 2% between 2022 and 2026.
"SG's strategic plan looks solid ... Financial targets and the planned capital distribution based on the presented capital trajectory look conservative but do not imply any upside to consensus estimates at this stage," Royal Bank of Canada said in a note to clients.
Traders said SocGen shares were set to open 1-2.5% lower.
Once competing on par with French banking leader BNP Paribas in the early 2000s, SocGen has gone through a tumultuous last 15 years, marked by heavy losses from a rogue trader on the eve of the 2008 financial crisis and a costly exit from Russia in the wake of the invasion of Ukraine last year.
SocGen also said it expected to reduce its cost-to-income ratio, a key a measure of a bank's efficiency, to less than 60% in 2026 from 75% in the second quarter.
SIMPLER BUSINESS
A SocGen veteran and former head of its investment bank, Krupa said he would streamline the bank's activities but didn't elaborate.
"We will strengthen the group by shaping a simplified business portfolio, while taking the right actions to build-up capital and increase flexibility, structurally improve our operating leverage and maintain our best-in-class risk management", Krupa said in a statement.
The lender also targets a CET1 ratio - a key measure of financial strength - of 13% in 2026, almost on par with the 13.1% reported at end of June, but including the expected additional requirements under global bank capital rules laid out by the Basel Committee of banking regulators.
The bank also said it would reduce its exposure to upstream oil and gas businesses by 80% by 2030 when compared to 2019.
SocGen didn't give any update on potential sale of non-core assets, after Krupa said last month he intended to run a "tight ship" in terms of portfolio of assets.
It has said it would sell four African units and review a fifth one on the continent. SocGen is also open to a sale of its equipment finance unit, sources have told Reuters.
The bank said its new strategy would lead to booking write-downs for the remaining part of its African, Mediterranean and Overseas activities, as well as its Equipment Finance division for a total of about 340 million euros.
SocGen trades at about a third of its book value, almost on par with Deutsche Bank but half the multiple of its bigger French rival BNP Paribas and Italy's UniCredit , amid concerns about the company's exposure to more volatile income from investment banking.
(Additional reporting by Tassilo Hummel; Writing by Mathieu Rosemain Editing by Ingrid Melander and Mark Potter)
