Bloomberg reports this morning that French bank giant Societe Generale is preparing to ax 1,600 jobs in its investment banking unit. The move is driven by the sharp drop in revenues in the trading unit.
The CEO of the company, Frederic Oudea is focusing on restoring profitability by cutting about 1,200 positions in the trading division at the Global Banking and Investor Solutions division. A total of 750 of the cuts are said to be in France.
Trading Slump Across to Board
The decline in trading is not isolated to Societe Generale in the first quarter of the year. The shocking end to the fourth quarter has pushed the risk-appetite of institutional investors even lower.
Several other banks have reported a tough environment for the industry. In the case of SocGen, the cuts are representing about six percent of the employees in the company’s Global Banking and Investor Solutions unit.
Aside from Paris, the cuts are also going to affect employees in London and New York, Bloomberg's report states, citing sources with knowledge of the matter.
Earlier this year the French bank abandoned its growth strategy and instead announced that it would be cutting its dividend Payments to shareholders. The lender is instead focusing on boosting its capital with CEO Oudea facing a vote to remain in his position later this year in May.
Over the past year, shares of SocGen lost about 40 percent of their value in an environment where a broad-based index of bank stocks across Europe declined about 17 percent.
Details about the Cuts
According to the Bloomberg report, the cuts are mostly affecting the fixed-income trading desks. The low profitability rates of this business segment are at the core of the decision with Oudea focusing the company’s effort on the more lucrative equity derivatives business.
Bloomberg’s banking analysts Jonathan Gyce and Georgi Ganchev think that the 1,600 job cuts are likely to be insufficient in the medium-term.
SocGen is also phasing out its over-the-counter (OTC) commodities trading business. The firm will be focusing on rates, credit, currencies, and prime broking to boost profitability while it is closing its proprietary trading unit.
The goal of the French bank is to save €500 million by next year. It is also looking for an exit from €8 billion worth of risk-weighted assets after parting ways with the Global Markets Head for fixed income and FX, Bruno Benoit.
