SocGen to expand corporate banking after trading losses

Bloomberg

Societe Generale SA plans to focus its investment bank more on corporate banking as Chief Executive Officer Frederic Oudea attempts to turn the unit around following steep trading losses on complex derivatives last year.
The Paris-based lender on Monday said the business, which is heavily geared toward markets activities, will pursue a “client-centric” strategy and allocate more capital to financing, advisory and transaction banking. The division, known as Global Banking and Investor Solutions, also set a profitability target for a return on normative equity of more than 10% from 2023.
Oudea, one of the longest-serving bank CEO’s in Europe, is joining peers including Deutsche Bank AG in emphasising corporate banking to reduce reliance on volatile trading. The markets business, SocGen’s one-time powerhouse, plunged the bank into its first annual loss in more than three decades after derivatives linked to dividends blew up at the onset of the pandemic.
SocGen rises 2.2% at 9:53 am in Paris trading, bringing gains this year to almost 50%, one
of the best performers among
European banks.
The French lender, which reviewed the unit in the wake of those losses, said it aims for a 3% revenue growth for its financing and advisory businesses between 2020 and 2023, while markets revenue is expected to normalise at around 5 billion euros in 2023. Other European lenders have sought to focus more on corporate banking over the past years, though their success has been mixed as the region’s negative interest rates weigh on income from lending. Deutsche Bank in 2019 exited equities trading altogether, focusing instead on the transaction bank as well as fixed income trading. But halfway into CEO Christian Sewing’s turnaround effort, it’s the trading business that’s kept the German lender on track after the pandemic fueled a market frenzy while delaying a return to more normal interest rates.
At SocGen, the equities trading business at the center of last year’s losses has since rebounded, turning in its best performance last quarter since 2015 and easing pressure on Oudea to take more radical steps. The bank designed new products and reshuffled top management in response to the losses.
Oudea made cuts to the investment bank before, slashing 1,200 jobs in the division in 2019 after a slump in trading revenue. He’s currently in the process of eliminating 640 jobs, mostly in the investment bank. SocGen has announced plans to cut 450 million euros in costs in its markets unit by 2023.