SocGen Cutting 1,600 Jobs in Blow to Investment Bank
Societe Generale said it plans to cut about 1,600 jobs after a slump in trading revenue.
(Bloomberg) --
Societe Generale SA said it plans to cut about 1,600 jobs after a slump in trading revenue pushed Chief Executive Officer Frederic Oudea 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 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 -- are persisting into 2019. UBS Group AG CEO Sergio Ermotti last month described the first quarter 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.
Paris Jobs
SocGen’s GBIS unit has more than 20,000 employees worldwide. Trading revenue plunged 19 percent in the fourth quarter, capping a disappointing year. Bloomberg News reported Friday that SocGen plans to cut about 700 jobs in Paris and eliminate hundreds more positions in London and New York after a difficult first quarter in investment banking, 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 isn’t really convincing,” said Lutz Roehmeyer, who helps manage 700 million euros ($790 million) at Capitulum Asset Management in Berlin, including SocGen shares. In trading, the bank is “reducing capacity and that’s going to make it harder to grow market share.”
Stock Suffers
The French bank has declined by 40 percent in the last 12 months, compared with a 17 percent drop in the Euro STOXX Banks Index. The shares were up 0.2 percent as of 4:09 p.m. in Paris after reversing earlier gains.
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.
“This news confirms that management is on a target to deliver the plan; however, the focus at first-quarter 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.
JPMorgan placed SocGen second to last in a ranking of eight European and U.S. investment banks and cut the lender’s first-quarter adjusted earnings per share estimates for the first quarter by 2 percent. Deutsche Bank ranked last.
What Bloomberg Intelligence Says
“Societe Generale’s 1,600 job cuts will likely prove
insufficient medium-term, and 1Q trading and financing will
probably continue to stutter.”-- Jonathan Tyce, Georgi Gunchev, banking analysts
Click here to view the researchClick here to view the research
The bank also said it plans to close its over-the-counter commodities business and its proprietary trading subsidiary and will reorganize 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-organization.
The company shuttered the Hong Kong desk of its Descartes Trading proprietary unit near the end of 2018 and has pulled back from some trading strategies, people with knowledge of the matter said. Despite the trading struggles, SocGen is also seeking to expand its derivatives footprint in Europe by buying Commerzbank AG’s equity-markets and commodities activities.
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 euros 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.
To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen
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