French Bank Gloom Hits Traders as BNP, SocGen Weigh Bonus Cuts

(Bloomberg) -- The troubles of French banks swept up their traders Thursday, with both BNP Paribas SA and Societe Generale SA weighing bonus cuts after a downturn that’s hit some of the world’s biggest financial firms.

BNP may hand lower or zero balances to many traders in its global markets unit after posting trading losses and shuttering some businesses, people with knowledge of the matter said. A majority of staff in credit and rates trading could receive no discretionary awards, the people said, asking not to be identified as the discussions are private.

At Societe Generale, steep cuts in traders’ bonus pool could be implemented for the second straight year, according to people with knowledge of the matter. Bonus levels will likely fall as much as a quarter, mirroring the levels of cuts a year ago the people said, asking not to be identified because the deliberations are private.

Both banks typically announces bonuses a few weeks after annual results. Spokesmen for BNP Paribas and SocGen declined to comment.

The likely bonus reductions are the latest bad news from French banks, once renowned for their prowess in complex derivatives and now struggling to navigate increasing risk. Societe Generale is weighing closing its $4.7 billion proprietary-trading unit, a week after news of BNP plans to shutter that business, people familiar with the matter said. Natixis SA said in December it took a hit from hedging Asian equity derivatives.

Societe Generale warned Thursday that group fourth-quarter trading revenue probably fell 20 percent. France’s third-largest bank said “challenging” conditions also led to a decline of about 10 percent in annual revenue from its markets units. Shares of the bank, which will report earnings in February, plunged 5.7 percent.

Tuesday, Bloomberg reported that BNP, the biggest French bank, lost $80 million in derivative trades linked to the U.S. stock benchmark late last year as turmoil gripped global markets, according to people familiar with the matter.

The French banks aren’t alone in suffering from wild markets that have stung traders worldwide. Morgan Stanley’s fixed-income traders posted their worst results in three years 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.

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