Weak results don’t matter

French Bank, Societe Generale (SocGen) reported its quarterly results,

Gross Operating Income fell from EUR 1.4bn to EUR 492 million,

EUR 820m is set aside for “cost of risk”,

The allowance or cost for these bad loan provisions have tripled from 21bps to 65 bps

Thus, it loses EUR 326m vs a profit EUR 640m in the same period last year,

Revenue falls 15% from the same period

Return on Equity is now – 0.50%

And interestingly price to book ratio is below 0.20



This market has nothing to do with economic reality and nothing to do with valuation reality. 

It’s a macro market, its a liquidity market and a money flow market.

This is the type of market and economic environment where companies are either or will;

go under;

need a bailout;

need to raise capital;

amble along or;

were strong going in and become stronger coming out

I know which “bucket” of companies I want to own and I’d be willing to pay a premium to own them.
This is a market which separates the well financed from the over-leveraged.

You want to own companies with a ‘fortress’ balance sheet and who is a ‘Gorilla’ in its market or industry.



April 30, 2020

by Rob Zdravevski


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