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Bloomberg
Societe Generale SA failed to halt the slide in its investment bank in a quarter where the key equities business and stronger capital levels were bright spots for Chief Executive Officer Frederic Oudea.
Profit at the unit that houses the trading operations declined 16 percent in what’s usually its strongest period. While earnings were dragged down by fixed-income trading, the larger business of buying and selling equities and providing services to hedge funds did better than most peers. A key measure of financial strength also improved after the bank pulled back from some riskier businesses and sold assets.
The diverging results show the challenge for Oudea, who is cutting 1,600 jobs across the bank after he had to give up his main mid-term targets for growth and profitability. The CEO, who is seeking investor support for a new term, is trying to show he can preserve leadership in businesses such as equity derivatives while meeting targets for capital and exiting or refocusing some fixed-income activities.
“We are adjusting the business where it’s necessary,†Oudea said in an interview on BFM Business television. The increase in financial strength should reassure investors, he said, adding there’s no plan for a rights issue.
SocGen shares rose as much as 2.6 percent and were trading 2.2 percent higher at 29 euros in Paris. The stock has gained about 4 percent this year.
SocGen shares have been trailing those of larger rival BNP Paribas SA this year, suggesting shareholders are yet to be convinced the bank is doing enough to turn the situation around. Some analysts have said that ongoing turnover at the trading unit might dent revenue and that the changes come with high execution risk. In February, SocGen replaced the markets unit’s head and the head of the fixed-income business is also leaving.
SocGen has a “solid team†in place to manage the key global banking and investor solutions unit and doesn’t need new executives, Deputy CEO Severin Cabannes said in a Bloomberg Television interview. He confirmed a Bloomberg report earlier this week that the bank’s global head of trading role will disappear as part of the reorganisation.
BNP SURPRISE
SocGen’s results contrast with those of larger rival BNP Paribas, which surprised markets with a rebound in fixed-income trading that beat European and US peers, offsetting continued weakness in equities. BNP, the country’s largest lender, is also cutting some trading businesses after revising down its goals.
Here are some more key highlights from SocGen’s first-quarter results: Net income fell 26% to 631 million euros, missing analyst estimates Group revenue declined 1.6% to 6.19 billion euros, in line with estimates Corporate financing & advisory revenue rose 19% Bank expects 250 to 300 million euros of restructuring costs in 2019 At SocGen, revenue from fixed-income trading slumped 16 percent, while equity and prime-services sales declined 5.3 percent. Overall, trading was down 7 percent.
Oudea is also struggling to revive revenue growth at its French retail business. Sales at the unit fell about 3.2 percent, while they were flat at BNP Paribas. Still, some good news came from the international banking and financial services operations, which posted a 4.4 percent increase, partly boosted by insurance and car-leasing.
The bank has sold several retail units in Eastern and central Europe and has pledged to accelerate disposals to bolster its funding levels. SocGen is selling its Slovenian retail unit SKB to OTP Bank Nyrt.