Societe Generale loses ground to other banks: can it make a turn around?

Goldman Sachs and Deutsche Bank are still not overly enthusiastic about the current state of Société Générale shares while the bank, which just posted a heavy loss for the second quarter, is facing major challenges. They maintain a neutral opinion on the value and, above all else, have recently lowered their price targets from €18.80 (US$22.29) to €18 (US$21.34) per share, and from €18.50 (US$21.94) to €16.50 (US$19.56) per share respectively. This is despite the fact that Deutsche Bank believes that the French bank may have already bottomed out in the second quarter of this year. Goldman Sachs, for its part, also reduced its share valuation due to a 0.5% increase in the cost of capital due to greater uncertainty over profits and losses in market share in the corporate and investment banking business.

More generally, for the banking sector as a whole, the pressure on the revenues of French banks is now forcing them to reduce their costs in a sustainable manner, according to the findings of a study by Scope Ratings which was published on 11 August. The pre-crisis problems have also not yet disappeared for the banks, and “the measures taken to revive the economy are even exacerbating them”, the rating agency notes. Indeed, the environment of low interest rates being exacerbated by the ultra-accommodating monetary policy of the European Central Bank (ECB) is heavily weighing on their margins.

And as the debt of French companies continues to increase, their ability to repay that debt could become quite a problem, says analyst Nicolas Hardy, the executive director in the financial institutions team at Scope Ratings. Hence the inevitable losses for banks on the credits they have granted…

With the current situation faced by the banks being as uncertain as it is, it has never been more important to follow the daily financial news, which is easy with our free companion app, Born2Invest.

What does the technical analysis say?

“French banks are still lagging behind compared to the CAC 40. This is notably the case for Societe Generale, which has hardly bounced back after the initial heavy shock of the health crisis,” notes Christophe Machinot, independent analyst and member of the board of the AFATE (French Association of Technical Analysts).

Using Ichimoku Kinkō Hyō analysis on the daily graph “allows us to quickly identify trends: bull above the cloud, bear below the cloud. In the case of Societe Generale, the end of February was marked by a very violent transition from an upward trend to a downward trend,” emphasizes the expert, who notes that “visually, the cloud has now become a barrier for the stock. So much so that the bank recorded a historic low of €11.34 (US$13.45) on 14 May 2020”.

In the last few days, we can see that the action is starting to bounce back to try to get through the cloud. Prices had already tried unsuccessfully to cross the cloud in July. “If in the coming weeks Societe Generale manages to exceed €16.27 (US$19.29) per share, this would be an overwhelmingly encouraging signal for the stock to finally break out of its current downwards trend, with a confirmation occurring above €18.29 (US$21.69) per share. But we must remain prudent for the time being, as investors will remain on hold as long as the prices do not move away from the all-time lows,” warned Christophe Machinot.

__

(Featured image by Mohamed Yahya via Wikimedia)

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

First published in Capital, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.