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Bloomberg
Societe Generale SA is considering closing its proprietary-trading unit, people familiar with the matter said, a week after French rival BNP Paribas SA decided to shut its operation.
SocGen executives are reviewing the future of the Descartes Trading division, which makes risky bets with its shareholders’ funds, said the people, who requested anonymity as the details are private. The bank may decide to close the unit as the business has struggled to make profits, the people said.
The Paris-based lender shuttered the unit’s Hong Kong desk towards the end of 2018 and has pulled back from some trading strategies, the people said. A spokeswoman for SocGen in Paris declined to comment. The bank posted an update that showed group trading revenues probably slumped 20 percent in the fourth quarter, when a spike in market volatility caught many traders by surprise.
France’s third-largest bank said “challenging†conditions led to a decline of about 10 percent in annual revenue from its markets units, sending its shares down as much as 5.4 percent. Its troubles add to a grim quarter for French banks, traditionally renowned for their prowess in complex derivatives and now struggling to navigate increasing risk as the trade war and slowing economies whipsaw markets.
Regulators in France allowed the country’s banks to persist with proprietary trading in the wake of the credit crisis, even as the US moved to ban the practice because of the risks it can pose to financial stability. Yet these units had to contend with new rules, costs and higher capital requirements, while volatility in 2018 has forced executives to wonder whether it’s worth dedicating any resources to the activity.
Crosstown rival BNP Paribas, the biggest French bank, has decided to close its prop-trading unit, Opera Trading Capital, Bloomberg reported last week.
The division struggled to make a profit last year amid market volatility, people familiar with the matter said. Both Paris-based banks had to set up walled-off units housing prop trading to comply with post-crisis French rules.
SocGen plans expense cuts at investment arm
Bloomberg
Societe Generale SA is planning to substantially cut costs at its corporate investment-banking unit, a person familiar with the matter said, after the French lender warned that “challenging†conditions in the fourth quarter dented revenue from market units.
Reductions are an urgent priority for Chief Executive Officer Frederic Oudea and may be presented as soon as early February, said the person, who requested anonymity because the details are private. A spok-esman for Societe Generale declined to comment.
France’s third-largest bank warned that trading revenue probably declined about 20 percent in the fourth quarter, undermining Oudea’s efforts to deliver on growth targets.
Societe Generale said that market conditions were behind the drop, and that trading revenue last year was probably about 10 percent lower compared with 2017.