SocGen Is Planning Urgent Cost Cuts at Investment Bank

(Bloomberg) -- Societe Generale SA is planning to substantially cut costs at its corporate investment-banking unit, a person familiar with the matter said, after the French lender warned that “challenging” conditions in the fourth quarter dented revenue from market units.

Reductions are an urgent priority for Chief Executive Officer Frederic Oudea and may be announced as soon as February, said the person, who requested anonymity because the details are private. A spokesman for Societe Generale declined to comment.

SocGen Is Planning Urgent Cost Cuts at Investment Bank

France’s third-largest bank warned on Thursday that trading revenue probably declined about 20 percent in the fourth quarter, undermining Oudea’s efforts to deliver on growth targets. SocGen said that market conditions were behind the drop, and that trading revenue last year was probably about 10 percent lower compared with 2017.

SocGen isn’t alone in suffering from wild markets that kept many clients on the sidelines in the fourth quarter. JPMorgan Chase & Co. and Goldman Sachs Group Inc. both missed analyst estimates for trading revenue, while Citigroup reported a 21 percent slide in fixed-income trading. Deutsche Bank AG, Germany’s biggest bank, has also hinted at a weak quarter.

SocGen shares are down almost 37 percent over the past twelve months in Paris. While that’s a sharper decline than for the Europe’s STOXX 600 banking index, it’s in line with bigger crosstown rival BNP Paribas SA over the same period.

SocGen is also considering steep cuts to its traders’ bonus pool for a second straight year, people with knowledge of the matter said this week. Bonuses will probably fall by as much as 25 percent, mirroring the levels of cuts a year ago, the people said, asking not to be identified because the deliberations are private. Tough market conditions in the fourth quarter will require the bank at the very least to cut the pool by 10 percent, the people said.

Oudea is seeking to restore investor confidence after the bank paid about $2.6 billion in penalties last year.

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