Societe Generale earnings halve
France's No 2 bank steps up cost cuts after result weighed down by accounting charges
Societe Generale, France's second-largest bank, said first-quarter profit dropped 50 per cent, hurt by accounting charges related to its own debt.
Net income fell to €364 million (HK$3.7 billion) from €732 million a year earlier, the bank said yesterday. It booked costs of €1.05 billion related to the revaluation of its debt in the period.
Societe Generale, trailing larger French rival BNP Paribas in boosting capital, is turning to cost cuts at home after trimming about 1,600 corporate and investment banking jobs last year and selling assets to comply with international capital rules.
The bank said it planned to cut 550 jobs at its Paris headquarters as part of additional cost reductions.
"We are currently in negotiation, in discussion with our unions in France on a staff reduction plan," deputy chief executive Severin Cabannes told Bloomberg television yesterday.
The company, led by chief executive Frederic Oudea, said it planned €900 million in additional cost savings by 2015. "In order to further boost the group's performance over the medium term, we will continue to adapt the business and leverage cost synergies," he said.
Oudea said the bank would "be in a position to generate" a return on equity of 10 per cent by the end of 2015.
Societe Generale's shares have gained 59 per cent in the past 12 months, giving the company a market value of about €22.3 billion. That compares with a 31 per cent gain in the Bloomberg Europe Banks and Financial Services Index of 40 companies.
Net income at Societe Generale's corporate and investment banking division rose 41 per cent to €494 million. Global markets revenue fell 13 per cent to €1.44 billion.
In February, the bank outlined plans to reorganise its main business into three units, made up of French consumer banking and a new division combining international retail banking with specialised financial services. It is also combining corporate and investment banking with investment management services including private banking.
The company said it planned to book €600 million of one-time costs and investments as part of the reorganisation to reach €900 million of additional annual savings by 2015 after the €550 million achieved last year, bringing total annual expense reductions to €1.45 billion over the period.