SocGen to deepen French job cuts

By BLOOMBERG

PARIS • Societe Generale SA (SocGen), seeking to restore growth and profitability, will deepen job cuts at its French consumer bank and take exceptional charges of about €570 million (RM2.78 billion) against fourth-quarter (4Q) earnings.

As many as 900 reductions may take place as the domestic retail banking business cuts branch numbers, resul- ting in a charge of about €400 million, SocGen said in a statement.

That’s on the top of the 2,550 positions the bank has already said it will eliminate. SocGen will book another exceptional expense related to three tax changes.

The unexpected charges were announced as SocGen CEO Frederic Oudea presents his third set of financial targets since the global credit crisis. The goals envisage progressive dividend growth and improved profi- tability, €3.6 billion of additional revenue within three years and the closure or sale of some businesses as the bank makes a push in tech investments and mobile banking.

SocGen was up 0.4% in Paris trading as of 11:21am yesterday. The stock has declined 7.9% this year, giving the company a market value of about €35 billion.

SocGen’s plans through 2020 are “more conservative than expected, with higher cost synergies and lower revenue growth, meaning management is less dependent on the cycle to reach its targets,” Maxence Le Gouvello, an analyst at Jefferies in London who has a ‘Buy’ rating on the stock, said in a note. The 4Q will be “a mixed bag”.

Oudea, who reorganised senior management during recent months, is seeking to restore annual revenue growth both in French retail and trading after declines in 2016 and so far this year. The bank, a leader in equity derivatives, is targeting about 2.5% annual sales growth through 2020 at its global-markets business.

In the 3Q, the bank was caught in a trading slump that also hit larger European rivals Deutsche Bank AG and Barclays plc. SocGen said it expects about 3% annual growth at its financing and advisory unit.

Oudea is examining potential asset sales or closures of “sub-scale” businesses to refocus the bank. Such divestments, whose effects are not taken into account in the 2020 financial targets, may represent 5% of SocGen’s risk-weighted assets, freeing capital for more profitable activities or creating opportunities to return money to shareholders, the bank said.

Oudea, speaking at the investor day, said that he expects to see four or five large banking players in Europe in the future, with consolidation first taking place at the domestic level to allow some firms to build scale in some countries. Consolidation “will take some time, its not a two-year process”, he said.