SocGen to cut 1,600 jobs globally after slump hits trading

By BLOOMBERG

PARIS • Societe Generale SA (Soc- Gen) said it plans to cut about 1,600 jobs after a slump in trading revenue pushed CEO Frederic Oudea (picture) to intensify efforts to boost profit at the investment-banking unit.

The reductions include close to 1,200 positions at the global banking and investor solutions (GBIS) division, which houses its trading activities, a trade union representing SocGen’s French employees said earlier, citing a briefing by the bank. About 750 jobs will disappear in France, SocGen said, without giving further details on where it plans to make the cuts.

The move by SocGen comes as some rivals indicated that challenging trading conditions — which prompted the bank to give a profit warning for the fourth quarter (4Q) — are persisting into 2019. UBS Group AG CEO Sergio Ermotti last month described 1Q as one of the toughest in years. BNP Paribas SA chairman Jean Lemierre in an April 2 interview said that “harsh” bouts of volatility remain a lingering threat for investment banks.

SocGen’s GBIS unit has more than 20,000 employees worldwide. Trading revenue plunged 19% in 4Q, capping a disappointing year. Bloomberg News reported last Friday that SocGen plans to cut about 700 jobs in Paris and eliminate hundreds more positions in London and New York, citing people with knowledge of the matter.

The restructuring comes at a critical juncture in Oudea’s 11-year tenure, with shareholders voting on his renewal in May. SocGen has become one of the few big European banks moving to propose a scrip dividend as the lender seeks to bolster capital, and the CEO recently abandoned his growth goals for 2020.

“This news confirms that management is on a target to deliver the plan; however, the focus at 1Q results will be on the bank’s financial position,” Jefferies analysts Maxence Le Gouvello Du Timat and Martina Matouskova said in a note to investors.

The French bank has declined by 40% in Paris trading in the last 12 months, compared to a 17% drop in the Euro STOXX Banks Index. The shares gained 0.2% to €26.58 (RM122.80) as of 9:27am yesterday and are down 4.5% this year.

The reductions will mostly focus on fixed-income trading. Businesses with poor profitability are on the chopping block as Oudea battles to preserve SocGen’s leadership in equity derivatives.

The bank also said it plans to close its over-the-counter commodities business and its proprietary trading subsidiary and will reorganise and refocus activities in rates, credit, currencies and prime services businesses to make them more profitable. The lender also said it plans to simplify the head office structure in international retail banking and financial services as part of the re-organisation.

SocGen is aiming for half a billion euros of annual cost savings by next year at the GBIS unit, and it’s reviewing capital allocation to protect businesses such as structured products.

The bank is seeking to cut about €8 billion of risk-weighted assets in global markets after abruptly replacing the division’s boss in February.

Bruno Benoit, head of the key fixed income and currencies trading unit, is among high-profile executives to leave the firm, people familiar with the matter said. — Bloomberg