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SocGen Signals It Missed Trading Rally as Momentum Slowed

SocGen Signals It Missed Trading Rally as Momentum Slowed

(Bloomberg) -- Societe Generale SA signaled it may have missed out on the trading boom that buoyed rivals in the second quarter and said it’s taking longer than expected for market conditions to return to normal as global lenders wrestle with the impact of the coronavirus.

Dividend cancellations that prompted heavy losses at the bank’s equities business in March continued to have an impact in April, before May brought a recovery “with intense hedges rebalancing,” SocGen said Tuesday in a presentation on its website. Fixed-income trading saw “lower volumes in a still solid market” in April and May.

SocGen Signals It Missed Trading Rally as Momentum Slowed

Shares of the French lender fell on the comments, dropping 5.1% at 11:33 a.m. in Paris trading. The stock is one of the worst performers among European banks this year, declining 45% so far in 2020.

SocGen slumped to a surprise first-quarter loss after coronavirus-related market volatility wiped out stock trading revenue and bad loan provisions surged. That’s added to pressure on Chief Executive Officer Frederic Oudea, the longest-serving leader of a top European bank, with the bank’s top governance body pushing for a strategic review of the various businesses, Bloomberg has reported.

Oudea -- who speaks later on Tuesday at a conference in Paris -- said in prepared remarks that the bank is performing a “thorough review” of its structured products business to limit risks in the case of “extreme market dislocation.” That may include offering a wider range or easier to manage products.

The trading update contrasts with remarks of Deutsche Bank AG CEO Christian Sewing, who said last month that the positive momentum enjoyed by its fixed-income trading unit in the first quarter carried over into April and May. Deutsche Bank last year exited equities trading.

JPMorgan Chase & Co. expects trading revenue in the current quarter to swell by about 50% from a year ago, co-President Daniel Pinto said late last month. Bank of America Corp. Chief Executive Officer Brian Moynihan said the increase at his firm might approach 10%.

The shock of the first quarter results is also prompting SocGen to halt fresh funding to oil trading firms in the Asia Pacific region and review its activities globally after it took a large hit because of the collapse of oil trading firm Hin Leong Trading (Pte) Ltd. The Singaporean company filed for creditor protection while owing it about $240 million, people with knowledge of the matter said last month, asking not to be identified as the plans are private.

SocGen set aside 342 million euros ($372 million) for risky assets in the period, in part related to two fraud-related charges. SocGen didn’t identify the cases but said it may have to provision more over the remainder of the year.

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