PARIS: Societe Generale, France's third-largest bank, unveiled on Tuesday a plan to cut 1,600 jobs, mainly at its corporate and investment banking arm, in a bid to buoy profitability after last year's poor performance.
SocGen had announced it would cut 500 million euros (US$563 million) in costs at its corporate and investment banking in early February after its fourth quarter results were hit by a steep market downturn, which in turn forced it to lower both profitability and revenue growth targets.
"Since early February, we have carried out a review of all the activities of corporate and investment banking. Our goal is to restore the business' profitability above the cost of capital," said Severin Cabannes, SocGen's deputy CEO and the head of its corporate and investment banking arm.
In February, Cabannes had admitted the cost-cutting plan would lead to job cuts at the unit which employs 18,000 people in 30 countries, but had refused to be specific until now.
The bank will cut 750 jobs in France, where all the redundancies will be made on a voluntary basis.
The other job cuts will be carried out abroad, mainly in New York and London, where the bank may fire people.
"This news confirms that management is on a target to deliver the plan," wrote brokerage Jefferies.
As part of the restructuring, SocGen will stop some businesses such as proprietary trading altogether.
"This activity never found its equilibrium or its profitability," Cabannes said.
The bank intends to end other businesses such as over-the-counter (OTC) commodity trading and will also reduce the size of other businesses such as its fixed-income arm. Associated jobs from support functions will also go, added Cabannes.
The bank has also decided to shut some clients off.
"There are some clients whose profitability is structurally insufficient so we will not service them any more," said Cabannes.
After years of low interest rates curtailed returns for retail banking, SocGen, BNP Paribas, Deutsche Bank and other big European banks have relied on the more volatile earnings from corporate and investment banking with mixed results.
Although shares of other major European banks have bounced back this year, SocGen shares are still down by more than three percent amid concerns over solvency and profitability. The stock has lost more than 39 percent over the past 12 months.
SocGen's CEO Frederic Oudea is under pressure from investors. He has said the bank will sell more assets than originally planned to boost the bank's solvency ratios.
The bank expects to free up to 10 billion euros in capital as part of the reorganization plan unveiled Tuesday.
(US$1 = 0.8881 euros)
(Reporting by Inti Landauro and Matthieu Protard; Editing by Sudip Kar-Gupta)