SocGen to deepen French job cuts, takes $678m charge
Societe Generale, 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 at the domestic retail banking business, resulting in a charge of about 400 million euros, Societe Generale said in a statement late on Monday. 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.
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."
The unexpected charges announced just before SocGen were Chief Executive Officer Frederic Oudea presented his third set of financial targets since the global credit crisis to investors in Paris on Tuesday. He's betting that a push in tech investments and mobile banking will bolster revenue and profitability. The new goals envisage progressive dividend growth and improved profitability with "strictly managed" market risks, according to a separate statement.
SocGen was up 0.9 percent in Paris trading as of 9:13 a.m. The stock has declined 7.4 percent this year, giving the company a market value of about 35 billion euros. "In a European banking sector undergoing radical industrial change, the group is ready to enter into a new phase of its development and transformation," said Oudea, 54.
The bank's new targets include the goal to generate 3.6 billion euros of additional revenue within three years as it prioritizes key clients. It also plans to close or sell some businesses and reduce by about 15 percent its banking branch network in France. Oudea, who reorganized 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 global leader in equity derivatives, is targeting about 2.5 percent annual sales growth 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 will also look at 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. Here are some of the bank's key targets to 2020: Compound annual growth rate of above 3 percent, 2020 costs equal or less than 17.8 billion euros, Return on tangible equity of about 11.5 percent, Fully-loaded CET1 ratio greater than or equal to 12 percent, Leverage ratio of between 4 percent and 4.5 percent, Dividend floor at 2.20 per share as from 2017, EPS growing to approximately 6.5 euros per share in 2020 and cost of risk 35-40 basis points in 2020.