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SocGen to take Q4 charges of up to €570 million

SocGen to take Q4 charges of up to €570 million

by Bloomberg 2 min. 28.11.2017 From our online archive
Bank announces surprise charges as SocGen Chief Executive Frederic Oudea presents third set of financial targets since global credit crisis to investors in Paris.
Photo: Shutterstock

(Bloomberg) Societe Generale expects to book exceptional charges of about €570 million in the fourth quarter, related to tax changes and a plan to cut more staff in France.

As many as 900 job cuts may take place at its domestic retail banking business, resulting in a charge ofabout €400 million, 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 take another exceptional expense related to three tax changes.

The bank announced the surprise charges as SocGen Chief Executive Frederic Oudea presents his third set of financial targets since the global credit crisis to investors in Paris on Tuesday.

He's betting that a push in technology investments and mobile banking will bolster revenue and profitability.

The new targets envisage progressive growth of the dividend and improved profitability with "strictly managed" market risks, according to a separate statement.

"In a European banking sector undergoing radical industrial change, the group is ready to enter into a new phase of its development and transformation," Oudea said.

The bank's new targets include the goal to generate €3.6 billion of additional revenue within three years as it prioritises key clients.

It also plans to close or sell some businesses and reduce by about 15% its banking branch network in France.

Leaner command

Oudea, who reorganised senior management along leaner lines of command during recent months, is seeking to guide SocGen to a return to 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% annual sales growth through 2020 at its global-markets business.

That's after a third quarter in which it was caught in a trading slump that also hit larger European rivals Deutsche Bank and Barclays.

The bank also said it expects about 3% 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% 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%.
  • 2020 costs equal or less than €17.8 billion.
  • Return on tangible equity of about 11.5%.
  • Fully-loaded CET1 ratio greater than or equal to 12%.
  • Leverage ratio of between 4% and 4.5%.
  • Dividend floor at €2.20 per share as from 2017.
  • EPS growing to approximately €6.5 per share in 2020.
  • Cost of risk 35-40 basis points in 2020.