French So­ci­ete Gen­erale to cut costs de­spite ris­ing prof­its


French bank So­ci­ete Gen­erale un­veiled Wed­nes­day a new cost cut­ting plan of 850 mil­lion eu­ros (US$925 mil­lion) to com­pen­sate for higher reg­u­la­tory costs, de­spite a jump in prof­its.

Net profit at the bank jumped by 25 per­cent for the April through June pe­riod from the same quar­ter last year to 1.35 bil­lion eu­ros, con­sid­er­ably higher than the av­er­age of 856 mil­lion ex­pected by an­a­lysts sur­veyed by the fi­nan­cial news ser­vice Fac­tSet.

The re­sult in­cludes a new pro­vi­sion of 200 mil­lion eu­ros for lit­iga- tion, tak­ing the to­tal to 1.3 bil­lion eu­ros.

So­ci­ete Gen­erale did not spec­ify what the pro­vi­sion was for, but its French ri­val Credit Agri­cole saw its shares plum­met 10 per­cent on Tues­day af­ter in­creas­ing its pro­vi­sions by 350 mil­lion eu­ros as it was in ad­vanced talks with U.S. author­i­ties for vi­o­lat­ing rules for dol­lar trans­ac­tions with coun­tries un­der U.S. em­bar­goes.

So­ci­ete Gen­erale has also been caught up in that U.S. probe, which cost another of its French ri­vals, BNP Paribas, US$8.9 bil­lion last year to set­tle.

While the bank’s sec­ond quar­ter earn­ings were boosted to the tune of 312 mil­lion eu­ros due to a reval­u­a­tion of its fi­nan­cial li­a­bil­i­ties, it also saw im­proved per­for­mance in sec­tors in­clud­ing French re­tail bank­ing and in­vest­ment bank­ing.

Net bank­ing in­come, a mea­sure of prof­itabil­ity from core bank­ing oper­a­tions, rose 9 per­cent to 6.54 bil­lion eu­ros.

Net profit from French re­tail bank­ing jumped by 20 per­cent to 419 mil­lion eu­ros, while its pri­vate bank­ing unit BFI saw its profit climb 15 per­cent to 691 mil­lion eu­ros.

How­ever its in­ter­na­tional re­tail bank­ing and fi­nan­cial ser­vices unit saw its net profit slide by 6.6 per­cent to 312 mil­lion eu­ros due to trou­bles in its Rus­sian oper­a­tions, which lost 45 mil­lion eu­ros in the sec­ond quar­ter.

So­ci­ete Gen­erale’s Rus­sian re­tail bank, Ros­bank, posted a net loss of 61 mil­lion eu­ros, which was half the amount lost in the first quar­ter of the year.

De­spite Rus­sia’s con­tin­u­ing eco­nomic cri­sis, So­ci­ete Gen­erale said loan is­suance lev­els were nor­mal­iz­ing af­ter hav­ing adopted a more se­lec­tive ap­proach and it had cut costs by elim­i­nat­ing 1,200 posts in the coun­try dur­ing the sec­ond quar­ter.

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