SOCIETE GENERALE: QUARTERLY FINANCIAL INFORMATION, Q2-2016 and H1-2016

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(1)  Excluding litigation issues, in basis points for assets at the beginning of the period, including operating leases. Annualised calculation
 (2) Excluding non-economic items. Gross EPS in H1 15: EUR 2.54 and EUR 2.71 in H1 16. See methodology note No. 3

Societe Generale's Board of Directors met on August 2nd, 2016 under the chairmanship of Lorenzo Bini Smaghi and examined the results for H1 and Q2 2016.

Book Group net income amounted to EUR 1,461 million in Q2 16, vs. EUR 1,351 million in 2015, due to the increased earnings of International Retail Banking & Financial Services as well as the recording of the capital gain on the disposal of Visa Inc. shares (EUR 662 million after tax in the Corporate Centre's results). International Retail Banking & Financial Services' earnings rose by nearly 36%, with an increase in all activities. Earnings were resilient in French Retail Banking (-5.2% vs. Q2 15) in a very unfavourable interest rate environment. Global Banking & Investor Solutions' contribution was lower compared with an exceptionally high level in Q2 15, at EUR 448 million, its best level since Q2 15 in a still uncertain environment (EUR 702 million in Q2 15). Group net income totalled EUR 2,385 million in H1 16, vs. EUR 2,219 million in H1 15. If non-economic items are stripped out, it amounted to EUR 2,428 million (vs. EUR 1,970 million in H1 15). In a challenging economic environment for banking activities, marked by a low interest rate environment and unstable markets, the Group benefited from its well-balanced diversified banking model, with a substantially higher contribution from Retail Banking in H1.

Net banking income totalled EUR 6,984 million in Q2 16 (+3.0%* vs. Q2 15). If non-economic items are stripped out, it amounted to EUR 7,195 million (+11.5%* vs. Q2 15), including notably the capital gain on the Visa disposal (EUR 725 million). The Group's net banking income came to EUR 13,159 million in H1 16 vs. EUR 13,222 million in H1 15, up 0.7%* when adjusted for changes in Group structure and at constant exchange rates. If non-economic items are stripped out, the increase is +4.3%*, at EUR 13,225 million vs. EUR 12,843 million in 2015.

The Group continued with its efforts to control operating expenses. They came to EUR 4,119 million in Q2 16, stable vs. Q2 15. Operating expenses totalled EUR -8,403 million in H1 16 vs. EUR -8,566 million in 2015. Excluding the Euribor fine refund and adjusted for IFRIC 21, operating expenses were stable in H1 16 vs. the same period in 2015. 

The Group's commercial cost of risk continued to decline, to 42 basis points in H1 16 (vs. 49 basis points in H1 15), towards the bottom end of the range announced by the Group at the beginning of the year, and to 38 basis points in Q2 16, down -6 basis points vs. Q2 15. The net cost of risk amounted to EUR -1,188 million in H1 16 (EUR -1,337 million in H1 15). During Q2, the Group recorded an additional EUR -200 million provision for litigation issues, as in Q2 15. The total net cost of risk in Q2 16 was EUR -664 million vs. EUR -724 million in
Q2 15.

The "Basel 3" Common Equity Tier 1 (fully-loaded CET1) ratio stood at 11.1% (10.9% at end-2015). Q2 capital generation helped finance the Group's targeted acquisitions (car fleet management group Parcours in France as well as the Private Banking activities of Kleinwort Benson in the United Kingdom), and the increase in the Group's risk-weighted assets. The total capital ratio amounted to 16.7% at end-June 2016 (vs. 16.3% at
end-2015).

Commenting on the Group's results for H1 2016, Frédéric Oudéa - Chief Executive Officer - stated:

"Societe Generale posted sound results in the second quarter due to the good commercial and financial performance of all the Group's businesses. Accordingly, the Group generated EUR 2,385 million of Group net income in the first six months of 2016, substantially higher than in H1 2015. These results, which have been achieved in a challenging environment, reflect the dynamism and strength of the Group's well-balanced banking model, the quality of its portfolios and the commitment of its teams in serving its customers. Societe Generale is determinedly pursuing the far-reaching transformation of its business model in order to adapt it to the changing needs of its customers and the new regulatory environment, with the aim of further developing synergies, increasing operating efficiency and boosting its profitability."

1. GROUP CONSOLIDATED RESULTS

1. Adjusted for revaluation of own financial liabilities and DVA
2. Corrected for the implementation of IFRIC 21

Net banking income

The Group's net banking income totalled EUR 6,984 million in Q2 16, taking H1 net banking income to EUR 13,159 million. In 2015, Q2 net banking income was EUR 6,869 million and H1 net banking income
EUR 13,222 million. When restated for the impact of the revaluation of own financial liabilities and DVA, net banking income came to EUR 7,195 million in Q2 16, vs. EUR 6,543 million in 2015 (+11.5%*) and EUR
13,225 million for H1 16, vs. EUR 12,843 million for H1 15 (+4.3%*). It includes the capital gain on the disposal of Visa Inc. shares, recorded in the Corporate Centre for EUR 725 million in Q2 16. When restated for this non-recurring item, the Group's net banking income excluding non-economic items was EUR 12,500 million for H1 16 (including EUR 6,470 million in Q2).

• French Retail Banking's (RBDF) net banking income was down -2.0% (excluding PEL/CEL effect) in Q2 16 and -2.5% in H1 16 compared with a very good year in 2015. In a low interest rate environment, the interest margin declined while financial commissions fell in an unfavourable market environment.
   
• International Retail Banking & Financial Services' (IBFS) net banking income rose +4.2%* in Q2 16 and +4.6%* in H1 16 compared with the same periods in 2015, with an increase in net banking income in all activities. Insurance continued to expand (+8.1%* vs. H1 15, and +8.3%* in Q2). Financial Services to Corporates' net banking income was up +9.3%* in Q2 16 vs. Q2 15, or +8.1%* in H1 16 vs. H1 15, driven by dynamic Operational Vehicle Leasing and Fleet Management activities (+11.7%* in H1 16 vs. H1 15).
   
• In an unstable market environment, notably following the UK referendum and fluctuations in commodity markets, Global Banking & Investor Solutions (GBIS) once again demonstrated the resilience of its multi-specialist model in serving its clients. Net banking income was down-8.7%* in H1 16 compared to a very high level at the beginning of 2015 (-8.3%* betweenQ2 15 and Q2 16).

The accounting impact of the revaluation of the Group's own financial liabilities was EUR -212 million in Q2 16, and EUR -67 million in H1 16. In 2015, the revaluation of own financial liabilities led to the recording of net income of EUR +312 million in Q2 and EUR +374 million in H1. The DVA impact is EUR 1 million in 2016, recognised in Q2 16 - it was EUR +14 million in Q2 15 for a total in H1 of EUR +5 million (see methodology note No. 7). These two factors constitute the restated non-economic items in the analyses of the Group's results. They lead to the recognition of self-generated earnings reflecting the market's evaluation of the counterparty risk related to the Group. They are also restated in respect of the Group's earnings for prudential ratio calculations.

Operating expenses

The Group's operating expenses amounted to EUR 8,403 million in H1 16 vs. EUR 8,566 million in H1 15. Without taking into account the refund of part of the Euribor fine and after correction of the IFRIC 21 impact, expenses were stable in H1 16 vs. H1 15. The taxes recorded in their entirety in the first half of 2016 amounted to EUR 523 million in H1 16 vs. EUR 400 million in 2015 (an increase of EUR +123 million). The IFRIC 21 adjustment consists in smoothing the charge recognised accordingly over the financial year in order to provide a more economic idea of the costs actually attributable to the activity for the period.

Operating expenses came to EUR 4,119 million in Q2 16, stable vs. Q2 15 (EUR 4,124 million). This stability reflects the ongoing efforts to control costs undertaken for several years. The current plan has therefore helped generate cumulative savings of EUR 400 million at end-June 2016 for non-recurring implementation costs of EUR 129 million. When this plan expires at end-2017, the Group will therefore have reduced its cost base by
EUR 2 billion per year in five years.

Operating income

The Group's gross operating income amounted to EUR 4,756 million in H1 16 (EUR 4,656 million in H1 15), including EUR 2,865 million in Q2 16 (vs. EUR 2,745 million in Q2 15).  

The Group's net cost of risk amounted to EUR -664 million in Q2 16, down -5.3%* vs. Q2 15, providing further confirmation of the good quality of the Group's assets. For H1 16, the net cost of risk was down -7.4%* vs. H1 15, at EUR 1,188 million. It includes a EUR -200 million provision for litigation issues in Q2 16, taking the total of this provision to EUR 1.9 billion.

The commercial cost of risk (expressed as a fraction of outstanding loans) continued to decline: it is situated towards the bottom end of the Group's full-year target range at 38 basis points in Q2 16 and 42 basis points in H1 16 (vs. 44 basis points and 49 basis points respectively for the same periods in 2015):

• In French Retail Banking, the commercial cost of risk continued to decline and stood at 33 basis points in Q2 16 and 34 basis points in  H1 16 (vs. 38 basis points in Q2 15 and 43 basis points in  H1 15), thanks to a decrease in all customer segments.
• At 64 basis points in Q2 16 and 69 basis points in H1 16 (vs. 96 basis points in Q2 15 and 106 basis points in H1 15), International Retail Banking & Financial Services' cost of risk was substantially lower, due primarily to an improvement in the cost of risk for business customers in Europe. The cost of risk in Russia remained stable in a still challenging economic environment. 
• Global Banking & Investor Solutions' cost of risk amounted to 29 basis points in Q2 16 and 35 basis points in H1 16 (vs. 10 basis points in Q2 15 and 11 basis points in H1 15). The second quarter was marked by the stability of the cost of risk in the oil and gas sector.

The gross doubtful outstandings ratio amounted to 5.1% at end-June 2016 (vs. 5.7% at end-June 2015). The Group's gross coverage ratio for doubtful outstandings stood at 64%, up +1 point vs. end-June 2015. The improvement in these indicators confirms the trend observed for several years and reflects the quality of the Group's assets.

The Group's operating income totalled EUR 2,201 million in Q2 16 or EUR 3,568 million for H1 (vs. EUR 2,021 million in Q2 15 and EUR 3,319 million in H1 15).

Net income

Group net income amounted to EUR 1,461 million in Q2 16, or EUR 2,385 million in H1 16. This compares with Group net income of EUR 1,351 million for Q2 15 and EUR 2,219 million in H1 15. This increase can be attributed primarily to the effect of the capital gain on the disposal of Visa Inc. shares, partially offset by a sharp decline in the revaluation of own financial liabilities. The earnings of the Group's businesses were generally stable (-1.6%), with the good results of Retail Banking activities offsetting the lower earnings of Global Banking & Investor Solutions in an unfavourable environment. 

When corrected for non-economic items (revaluation of own financial liabilities and DVA), Group net income was EUR 1,599 million in Q2 16, and EUR 2,428 million for H1, vs. EUR 1,137 million in Q2 15 and EUR 1,970 million in H1 15.

The Group's ROE was 8.1%(^[1]) in Q2 (11.7% in absolute terms) and 7.4%(1) in H1 (9.4% in absolute terms). On a comparable basis, ROE amounted to 10.3% for Q2 15 (9.1% in absolute terms) and 9.7% for H1 15 (11.2% in absolute terms).

Earnings per share amounts to EUR 2.71 for H1 16 (vs. EUR 2.54 in H1 15). When adjusted for non-economic items, EPS for H1 16 is EUR 2.77 vs. EUR 2.22 in H1 15.

2. THE GROUP'S FINANCIAL STRUCTURE

Group shareholders' equity totalled EUR 58.5 billion at June 30th, 2016 (EUR 59.0 billion at December 31st, 2015). Net asset value per share was EUR 61.41, including EUR 1.77 of unrealised capital gains. Tangible net asset value per share was EUR 55.37.

The consolidated balance sheet totalled EUR 1,460 billion at June 30th, 2016 (EUR 1,334 billion at December 31st, 2015). The net amount of customer loan outstandings, including lease financing, was EUR 393 billion (EUR 386 billion at December 31st, 2015) - excluding assets and securities sold under repurchase agreements. At the same time, customer deposits amounted to EUR 379 billion, vs. EUR 360 billion at December 31st, 2015 (excluding assets and securities sold under repurchase agreements).

In H1 2016, the Group issued EUR 20.0 billion of medium/long-term debt with EUR 17.8 billion at parent company level (in respect of a financing programme of EUR 31 billion in 2016), having an average maturity of 5.6 years and an average spread of 47 basis points (vs. the 6-month mid-swap, excluding subordinated debt), and
EUR 2.2 billion by the subsidiaries. The LCR (Liquidity Coverage Ratio) increased and was well above regulatory requirements at 148% at end-June 2016 vs. 124% at end-2015.

The Group's risk-weighted assets amounted to EUR 355.1 billion at June 30th, 2016 (vs.EUR 356.7 billion at end-December 2015) according to CRR/CRD4 rules. Risk-weighted assets in respect of credit risk represent 83% of the total, at EUR 293.6 billion, down -1.6% vs. December 31st, 2015.

At June 30th, 2016, the Group's fully-loaded Common Equity Tier 1 ratio^([2]1) stood at 11.1% (10.9% at end-December 2015), stable in Q2 16 and up +22 basis points vs. end-December 2015. The Tier 1 ratio was 13.6% (13.5% at end-December 2015) and the total capital ratio amounted to 16.7% (16.3% at end-December 2015) and was up +23 basis points vs. end-March 2016 and +40 basis points vs. end-December 2015. The Group is continuing with efforts to increase its equity capital and is aiming for a Common Equity Tier 1 ratio of 11.5% to 12% by 2018.

The leverage ratio stood at 3.9% at June 30th, 2016 (4.0% at end-December 2015).

On July 29th, the European Banking Authority published the results of the 2016 stress test. Societe Generale provided further confirmation of the soundness of its balance sheet and the quality of its portfolio enabling it to withstand a severe stress situation: the regulatory capital ratio at end-2018 comes to 11.9% according to the standard stress scenario and 8.0% in a severe stress situation. 

The Group is rated by the rating agencies DBRS (long-term rating: "A (high)" with a stable outlook; short-term rating: "R-1 (middle)"), FitchRatings (long-term rating: "A" with a stable outlook; short-term rating: "F1"), Moody's (deposit and senior unsecured long-term ratings: "A2" with a stable outlook; short-term rating: "P-1" and long-term Counterparty Risk Assessment of "A1"), Standard & Poor's (long-term rating: "A" with a stable  outlook; short-term rating: "A-1") and R&I (long-term rating of "A" with a stable outlook).

3. FRENCH RETAIL BANKING

1. Corrected for the implementation of IFRIC 21 and PEL/CEL

French Retail Banking enjoyed a healthy commercial momentum accompanied by sound profitability in Q2 16 and H1 16, despite the low interest rate environment.

The customer base continued to expand in H1 16 in the individual customer segment. Boursorama, the leading 100% mobile bank, strengthened its leadership position in France with nearly 870,000 customers while the number of new customers was robust in the branch networks (+230,000). In the business segment, French Retail Banking established relationships with more than 2,800 new companies in H1 16 (+8% vs. H1 15) due to the dynamism of its teams and the recognised quality of its services. Societe Generale remains the market leader in France for companies developing internationally (source: CSA French market research agency).

Average outstanding loans rose +3.5% in Q2 16 vs. Q2 15 and amounted to EUR 183.0 billion. This increase was primarily driven by the growth in outstanding housing loans (+5.7%) as well as by corporate loans (+1.9%). Investment loan production was up 27% vs. Q2 15, reflecting the rebound observed for several quarters. After a record year in 2015, housing loan production was lower in Q2 16 (-33% year-on-year), albeit with a pick-up in production compared to Q1 16.

Balance sheet deposits continued to enjoy strong growth of 6.9% to EUR 182.5 billion vs. Q2 15, driven by sight deposits (+17.9%). Over the same period, the level of gross life insurance inflow remained buoyant
(EUR +2.6 billion), as did the net inflow of Private Banking in France (EUR +1.1 billion). The other growth drivers were also healthy with, in particular, a substantial increase in factoring and cash management income. Continuing on its downtrend, the average loan/deposit ratio now amounts to 100% (vs. 105% in Q4 15).

This healthy commercial momentum was partially reflected in French Retail Banking's net banking income which suffered from the negative effects of the low interest rate environment and housing loan renegotiations. After neutralising the impact of PEL/CEL provisions, net banking income was down -2.0% vs. Q2 15 at
EUR 2,087 million, in line with expectations.

Net interest income (excluding PEL/CEL provision) was 2.7% lower than in Q2 15, with the production of higher margin loans and strong deposit inflow only partially mitigating the impact of low interest rates and renegotiations. Commissions were down -0.8%, reflecting mixed trends: service commissions rose +4.0% thanks to the development of synergies with the Group's other businesses and the substantial new customers won, whereas financial commissions were down -15.4% due to lower transaction volumes in an unstable market environment.

French Retail Banking's operating expenses rose +2.8% in Q2 16 (vs. Q2 15), reflecting increased investments in the digital transformation process whereas other expenses continued to be rigorously controlled. As part of its transformation plan, Societe Generale has notably launched the 100% online consumer loan application and the Group has closed 43 branches in France since the beginning of the year.

The net cost of risk declined by 8.2% in Q2 16 vs. Q2 15, reflecting the quality of the portfolio. Operating income totalled EUR 592 million in Q2 16 (down -12.4%).

French Retail Banking's contribution to Group net income amounted to EUR 403 million in Q2 16
(vs. EUR 425 million in Q2 15). The contribution to Group net income was slightly lower (-2.5%), excluding the PEL/CEL effect. However, the level of profitability remained robust (ROE of 14.8% excluding PEL/CEL effect and pro forma for IFRIC).

In H1 16, French Retail Banking posted net banking income of EUR 4,184 million (-2.5% excluding PEL/CEL effect vs. H1 15), operating expenses of EUR -2,765 million (+2.6%) and operating income of EUR 1,071 million
(-4.3%). Its contribution to Group net income amounted to EUR 731 million, up +3.8% vs. H1 15, representing a very satisfactory ROE of 14.8% (excluding PEL/CEL effect and restated for IFRIC 21).

4. INTERNATIONAL RETAIL BANKING & FINANCIAL SERVICES

The division's contribution to Group net income totalled EUR 436 million in Q2 16, up +35.8% vs. Q2 15. The increase can be attributed to revenue growth of +4.2%*, a decline in the cost to income ratio of 1 point and a significantly lower net cost of risk (-27.5%*) than in Q2 15.

In H1 16, revenues totalled EUR 3,716 million (up +4.6%* vs. H1 15), operating income amounted to
EUR 1,142 million (+32.3%*) and the contribution to Group net income came to EUR 736 million (+56.9%).

1. Corrected for the implementation of IFRIC 21

International Retail Banking

International Retail Banking's outstanding loans rose +6.8%* in Q2 16 vs. Q2 15, to EUR 80.4 billion. The increase was particularly strong in Europe and Africa. Deposits also continued to enjoy robust growth in virtually all the countries where the Group operates. Outstanding deposits totalled EUR 72.2 billion at end-June 2016,
up +5.2%* year-on-year, with very dynamic inflow in Central and Eastern European countries and in Africa.

International Retail Banking posted net banking income of EUR 1,243 million in Q2 16 (+3.4%*), primarily due to the good business performance in Central and Eastern Europe and in Sub-Saharan Africa, as well as the gradual recovery in Russia and Romania. Gross operating income came to EUR 517 million (+9.5%*) and the contribution to Group net income was EUR 195 million, vs. EUR 128 million in Q2 15 (+52.3%).

International Retail Banking's net banking income totalled EUR 2,461 million in H1 16, up +4.9%* vs. H1 15.
The contribution to Group net income came to EUR 317 million compared to EUR 162 million in H1 15.

In Western Europe, outstanding loans were up +7.6%* at EUR 15.0 billion. Car financing was particularly dynamic over the period. In Q2 16, the region posted net income of EUR 171 million, gross operating income of
EUR 81 million and a contribution to Group net income of EUR 45 million, up +25.0% vs. Q2 15.

In the Czech Republic, Komercni Banka (KB) delivered a solid commercial performance in Q2 16. Outstanding loans rose +9.4%* vs. Q2 15 to EUR 20.8 billion, driven by dynamic production of loans to individuals and large corporates. Over the same period, outstanding deposits climbed +6.5%* to EUR 25.8 billion. Net banking income was slightly lower in Q2 16 (-0.4%*) than in Q2 15 at EUR 259 million, given the persistent low interest rate environment. Over the same period, operating expenses were down -12.8%* primarily due to the smaller contribution to the deposit guarantee fund in Q2. The net cost of risk is normalising and amounted to
EUR 17 million in Q2 16. The contribution to Group net income was stable at EUR 52 million.

On July 1st, 2016, the KB subsidiary, Essox, concluded an agreement for the acquisition of 100% of the shares in PSA Finance in the Czech Republic and Slovakia.

In Romania (BRD), the economic environment is gradually improving. BRD's outstanding loans rose +3.7%* to EUR 6.3 billion, primarily in the individual customer and large corporate segments. Outstanding deposits were up +6.4%* at EUR 8.9 billion. In this context, the BRD Group's net banking income was 6.3%* higher than in Q2 15 at EUR 136 million. Operating expenses were down -1.3%* over the period, due to rigorous cost control, at
EUR 74 million and the net cost of risk was down -47.1%* at EUR 18 million. BRD's contribution to Group net income was EUR 21 million in Q2 16, compared to EUR 8 million in Q2 15.

In other European countries, the Group maintained a strong deposit inflow in Q2 16 (outstandings up +6.1%* at EUR 11.2 billion), while outstanding loans were 6.6%* higher at EUR 11.6 billion, principally in the individual customer segment. In Q2 16, net banking income was up +4.5%* vs. Q2 15 at EUR 186 million, operating expenses were down -0.9%* at EUR 109 million and the net cost of risk was down -8.3%*. The contribution to Group net income came to EUR 40 million, up +21.2% vs. Q2 15.

In Russia, the environment has stabilised. Corporate activity remains buoyant and we have observed a gradual recovery in loan production for individual customers. Against this backdrop, outstanding loans were slightly lower (-1.5%*) than in Q2 15 at EUR 8.3 billion.  Outstanding deposits were down -7.4%* vs. Q2 15 at EUR 6.4 billion, due to a decrease in USD outstanding deposits, in line with objectives. Net banking income climbed +22.9%* in Q2 16 to EUR 145 million, in conjunction with the improvement in margins and loan production volumes. Costs remained under control at EUR 120 million, up +0.8%* in a high inflation environment. Overall, SG Russia(^[3]1) generated a loss of EUR -12 million in Q2 16, an improvement compared to Q1 16 (EUR -18 million) and Q2 15 (EUR -43 million). In this environment, the Group has confirmed an anticipated loss of EUR -50 million to
EUR -100 million for 2016 for SG Russia.

In Africa and other regions where International Retail Banking operates, outstanding loans rose +8.4%* vs. Q2 15 to EUR 18.4 billion. Business was particularly dynamic in Algeria and Côte d'Ivoire. Over the same period, outstanding deposits amounted to EUR 18.1 billion, up +7.0%*. At EUR 346 million, net banking income rose +1.5%* vs. Q2 15. Operating expenses were up +7.4%* and the net cost of risk was down -24.0%*. Overall, the contribution to Group net income rose +3.4% to EUR 60 million.

Insurance

The Insurance business maintained its commercial momentum in Q2 16. Life insurance outstandings rose +2.8%* vs. Q2 15 to EUR 95.8 billion. Net inflow amounted to EUR 0.6 billion in Q2 16, with the proportion of unit-linked products remaining at a high level (76%). In terms of protection (Personal Protection and Property/Casualty insurance), business was also buoyant with premiums climbing +9.2%* vs. Q2 15 to EUR 345 million in Q2 16.

The Insurance business delivered another sound financial performance in Q2 16. Net banking income was 8.3%* higher than in Q2 15 at EUR 221 million. The contribution to Group net income was up +10.2% in Q2 16, at
EUR 97 million.

In H1 16, net banking income was up +8.1%* and the contribution to Group net income up +10.8% vs. H1 15.

Financial Services to Corporates

Operational Vehicle Leasing and Fleet Management continued to enjoy strong growth in its vehicle fleet in Q2 16 (+15.0% vs. Q2 15). The acquisition of the Parcours Group, carried out in Q2 16 (+66,000 vehicles), enables ALD Automotive to strengthen its position in the SME and VSE customer segment and accelerate its growth in the French and European markets. This performance was also underpinned by the successful development of its partnerships with car manufacturers and retail banking networks.

Equipment Finance's outstanding loans totalled EUR 16.0 billion (excluding factoring), up +4.9%* vs. Q2 15, driven by the transport and industrial equipment sectors. New business margins held up well despite an intense competitive environment.

Financial Services to Corporates continued to enjoy a strong momentum in Q2 16, with net banking income of EUR 418 million, substantially higher than in Q2 15 (+9.3%*). Operating expenses totalled EUR 207 million,
up +6.4%*. Earnings were 23.3% higher than in Q2 15, with a contribution to Group net income of
EUR 148 million. In H1 16, Financial Services to Corporates' net banking income came to EUR 803 million (+8.1%* vs. H1 15). The contribution to Group net income amounted to EUR 276 million (+20.0% vs. H1 15).

5. GLOBAL BANKING & INVESTOR SOLUTIONS

1. Corrected for the implementation of IFRIC 21 and the positive non-recurring impact of the Euribor fine refund in Q1 16

In Q2 16, Global Banking & Investor Solutions' net banking income totalled EUR 2,435 million, up for the third consecutive quarter. However, it was down -9.5% vs. a Q2 15 that benefited from a particularly favourable market environment in all activities (EUR 2,691 million).

Net banking income totalled EUR 4,792 million in H1 16, down -9.5% year-on-year.

Global Markets & Investor Services

Global Markets & Investor Services' net banking income amounted to EUR 1,544 million in Q2 16, down
-11.3% vs. Q2 15 (and -12.1% in H1 16 at EUR 3,093 million). In line with the previous quarter, Q2 was marked by the gradual normalisation of the markets and generally buoyant commercial activity, despite the result of the referendum on the United Kingdom's exit from the EU.

• Equities' net banking income was down -29.2% in Q2 16 vs. Q2 15, at EUR 568 million, with a decline of -33.1% in H1 16 vs. H1 15. Despite a pick-up in demand on structured products, notably in Asia, activity was lower compared with a very buoyant H1 15.  Listed products, in which the Group retains a recognised global leadership position, provided further confirmation of the healthy trend in Q1, with strong client demand, whereas the business' other activities, notably cash equities, experienced a decline in earnings.
• At EUR 629 million, Fixed Income, Currencies & Commodities' net banking income was up +2.8% vs. Q2 15 and +9.7% in H1 16. This good performance was driven by rate and commodity activities which maintained the momentum observed in Q1, as well as the higher contribution of Emerging Markets activity.
• Prime Services' net banking income totalled EUR 176 million in Q2 16, up +23.1% vs. Q2 15 (and +17.0% in H1 16 vs. H1 15). This result reflects a strong commercial momentum and the successful integration of Newedge.
• Securities Services' assets under custody amounted to EUR 4,012 billion at end-June 2016, up 1.0% year-on-year. Over the same period, assets under administration fell -4.0% to EUR 580 billion. Securities Services' revenues were down -7.1% in Q2 16 vs. Q2 15 at EUR 171 million (and -11.5% in H1 16 vs. H1 15), due to a reduction in transactional activity, the decline in markets and a negative interest rate environment.

Financing & Advisory

Financing & Advisory's net banking income came to EUR 637 million, down -7.8% vs. a very high level in
 Q2 15, but virtually stable in H1 16 (-0.7% vs. H1 15). The performance was driven by capital market activities, notably in Debt Capital Markets which benefited from an active market in the second quarter. Q2 16 was also marked by the commercial dynamism of investment banking, both in equity issues and advisory activities. Natural resources financing remained dynamic, in a highly competitive environment. Societe Generale's expertise was recognised again in Q2 16, with the title of "Best Export Finance Bank", awarded by Trade Export Finance.

Asset and Wealth Management

The net banking income of the Asset and Wealth Management business line totalled EUR 254 million in Q2 16, down -1.9% vs. Q2 15. The decline amounted to -12.2% in H1, against the backdrop of a declining market and weak transactional activity.

Private Banking's assets under management amounted to EUR 116.8 billion at end-June 2016. Driven by inflow of EUR +0.7 billion, notably in France and the United Kingdom, after the integration of Kleinwort Benson, assets under management were slightly higher (+0.4%) than in H1 15, despite negative market and currency effects. Net banking income was up +1.5% vs. Q2 15, at EUR 204 million, due to structure effects, but down -9.5% in H1 16. The gross margin remained at a satisfactory level of 106 basis points.

 Lyxor's assets under management came to EUR 100.9 billion (+1.4% vs. H1 15), underpinned by positive inflow. Lyxor has maintained its No. 3 ETF ranking in Europe, with a market share of 10.1% (source ETFGI). Net banking income amounted to EUR 43 million in Q2 16, lower than in 2015 (-17.3% vs. Q2 15 and -27.9% in H1 16 vs.
H1 15), but substantially higher than in Q1.

Operating expenses

Global Banking & Investor Solutions' operating expenses were slightly lower (-0.4% in Q2 16 vs. Q2 15). They were down -4.5% in H1, with Q1 including the negative effect of the implementation of the IFRIC 21 standard, offset by the refund of part of the Euribor fine^{(1). When restated for these two effects, operating expenses were generally stable vs. H1 15, reflecting the efforts made to control costs. The cost to income ratio amounted to 72.4% in H1 16.}

Operating income

Gross operating income came to EUR 682 million, down -26.7% vs. a high level in Q2 15, and -20.4% in H1 16 vs. H1 15, at EUR 1,322 million.

The net cost of risk totalled EUR -106 million in Q2 16, an improvement of EUR 36 million vs. Q1 16. It was EUR
-246 million in H1 16 (EUR -106 million in H1 15).

The division's operating income totalled EUR 576 million in Q2 16, down -34.2% vs. Q2 15, and
EUR 1,076 million in H1 16, down -30.8%.

Net income

The division's contribution to Group net income came to EUR 448 million in Q2 16 (-36.2% vs. Q2 15) and
EUR 902 million in H1 16. When restated for the effect of the IFRIC 21 standard and the partial refund of the Euribor fine, the division's ROE amounted to 10.1% in H1 16 (11.7% in absolute terms).

6. CORPORATE CENTRE

1. Adjusted for revaluation of own financial liabilities

The Corporate Centre includes:

-              the property management of the Group's head office,

-              the Group's equity portfolio,

-              the Treasury function for the Group,

-              certain costs related to cross-functional projects and certain costs incurred by the Group and not
re-invoiced to the businesses.

The Corporate Centre's net banking income totalled EUR 558 million in Q2 16 (EUR 148 million in    Q2 15), and EUR 770 million excluding the revaluation of the Group's own financial liabilities (EUR -164 million in Q2 15). The Corporate Centre's gross operating income was EUR 570 million in Q2 16 vs. EUR 135 million in Q2 15. When restated for the revaluation of own financial liabilities (see methodology note No. 7), gross operating income came to EUR 782 million in Q2 16 (vs. EUR -177 million in Q2 15).

The Corporate Centre's revenues include, in Q2 16, the capital gain on the disposal of Visa Inc. shares, for
EUR 725 million in Q2 16, reflecting the share disposals carried out by the Group's different entities and subsidiaries. Accordingly, gross operating income, excluding non-economic items and disposal capital gain, amounted to EUR 57 million in Q2 16 and EUR -188 million in H1 16.

The Corporate Centre's contribution to Group net income was EUR 174 million in Q2 16, vs. EUR -97 million in Q2 15.

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