SocGen to deepen French job cuts, takes $678mn charge

Bloomberg

Societe Generale SA, seeking to restore growth and profitability, will deepen job cuts at its French consumer bank and take exceptional charges of about 570 million euros ($678 million) against fourth-quarter earnings.
As many as 900 reductions may take place as the domestic retail banking business cuts branch numbers, resulting in a charge of about 400 million euros, SocGen said in a statement.
That’s on the top of the 2,550 positions the bank has already said it will eliminate. SocGen will book another exceptional expense related to three tax changes.
The unexpected charges were announced as SocGen Chief Executive Officer Frederic Oudea presents his third set of financial targets since the global credit crisis. The goals envisage progressive dividend growth and improved profitability, 3.6 billion euros of additional revenue within three years and the closure or sale of some businesses as the bank makes a push in tech investments and mobile banking.
SocGen was up 0.4 percent in Paris trading as of 11:21 a.m. The stock has declined 7.9 percent this year, giving the company a market value of about 35 billion euros. SocGen’s plans through 2020 are “more conservative than expected, with higher cost synergies and lower revenue growth, meaning management is less dependent on the cycle to reach its targets, “ Maxence Le Gouvello, an analyst at Jefferies in London who has a buy rating on the stock, said in a note. The fourth quarter will be “a mixed bag.”

LEANER COMMAND
Oudea, who reorganised senior management during recent months, is seeking to restore annual revenue growth both in French retail and trading after declines in 2016 and so far this
year. The bank, a leader in equity derivatives, is targeting about
2.5 percent annual sales gro-
wth through 2020 at its global-markets business.
In the third quarter, the bank was caught in a trading slump that also hit larger European rivals Deutsche Bank AG and Barclays Plc. SocGen said it expects about 3 percent annual growth at its financing and advisory unit.
Oudea is examining potential asset sales or closures of “sub-scale” businesses to refocus the bank. Such divestments, whose effects are not taken into account in the 2020 financial targets, may represent 5 percent of SocGen’s risk-weighted assets, freeing capital for more profitable activities or creating opportunities to return money to shareholders, the bank said.
Oudea, speaking at the investor day, said that he expects to see four or five large banking players in Europe in the future, with consolidation first taking place at the domestic level to allow some firms to build scale in some countries. Consolidation “will take some time, its not a two-year process,” he said.