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Société Générale takes third-quarter restructuring hit

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Via Financial Times

Société Générale’s profits came in below estimates in the third quarter as revenues at its investment bank faltered amid a restructuring effort.

France’s third-largest bank reported net income fell 34.8 per cent to €854m, from €1.3bn a year ago, due in part to a €115m charge related to the closing of the bank’s operations in the Balkans. Analysts had expected a net income figure of €942m.

SocGen’s equity trading revenue — long considered one of its key strengths — dropped 20 per cent in the quarter “against a backdrop of lower volumes and adverse market conditions, particularly in August”.

Revenues from fixed income, currency and commodity trading rose 1 per cent in the quarter, which the bank put down to “strong client activity in financing and rates and credit, offsetting impact of business closures”.

The gain lagged French rival BNP, which posted a 35 per cent year-on-year jump, and Wall Street rivals who had an increase of around 10 per cent.

Overall, revenue at its global banking and investor solutions business — which takes in trading and investor funding — dropped 7.6 per cent. It “delivered resilient net income in an unfavourable environment, without yet benefiting from the positive effects of the ongoing restructuring which is ahead of its 2020 objectives”, said chief executive Frédéric Oudéa, who has led the bank for 11 years.

The Paris-based lender announced 1,600 job cuts in April following several quarters of poor performance at its investment bank as part of a push to reduce its annual costs by €500m. The bank plans to close its commodities business and proprietary trading unit and is reorganising its fixed-income division to make it more profitable.

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The bank’s international retail revenues gained 5 per cent and French retail revenues were up slightly.

As part of its deleveraging and reduction of risk-weighted assets, SocGen has built up its capital buffer, having hit its 2020 common equity tier one capital target of 12 per cent last quarter.

“Once again this quarter, we have achieved results very much in line with our objectives and priorities. In terms of capital, there was a further substantial increase in the CET1 ratio to 12.5 per cent,” said Mr Oudéa.

The bank’s shares have declined 3 per cent this year.

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