French bank SocGen intends to cut 1,600 jobs in bid to buoy profits

PARIS (Reuters) – Societe Generale (PA:SOGN), France's third-largest bank, unveiled on Tuesday an insurance policy to cut 1,600 jobs, mainly at its corporate and investment banking arm, in the bid to buoy profitability after last year's poor performance.

SocGen had announced may well cut 500 million euros ($563 million) in costs at its corporate and investment banking noisy . February after its fourth quarter outcome was hit with a steep market downturn, which will forced it to minimize both profitability and revenue growth targets.

"Since early February, we’ve conducted analysis every one of the activities of corporate and investment banking. Our goal would be to restore the business' profitability through the expense of capital," said Severin Cabannes, SocGen's deputy CEO plus the head of the company’s corporate and investment banking arm.

In February, Cabannes had admitted the cost-cutting plan would result in job cuts in the unit which employs 18,000 persons in 30 countries, but had refused specifically up to now.

The bank will cut 750 jobs in France, where every one of the redundancies is going to be made on a voluntary basis.

The other job cuts might be performed abroad, mainly in Ny and London, in which the bank may fire people.

"News reports confirms that management is on a target to generate the project," wrote brokerage Jefferies.

As a part of the restructuring, SocGen will stop some businesses like proprietary trading altogether.

"This activity never found its equilibrium or its profitability," Cabannes said.

The bank intends to end other businesses for instance over-the-counter (OTC) commodity trading as well as reduce the measurements other manufacturers for instance its fixed-income arm. Associated jobs from support functions will also go, added Cabannes.

The bank additionally thought to shut some clients off.

"There are numerous clients whose profitability is structurally insufficient so that we will not likely service them much more," said Cabannes.

After a great deal of low interest rates curtailed returns for retail banking, SocGen, BNP Paribas (PA:BNPP), Deutsche Bank (DE:DBKGn) and other big European banks have depended on greater 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 down by over 3 % amid concerns over solvency and profitability. The stock has lost above 39 percent over the last A year.

SocGen's CEO Frederic Oudea is pressurized from investors. Bigger said the bank will sell more assets than originally planned to further improve the bank's solvency ratios.

The bank expects to release to 10 billion euros in capital in the reorganization plan unveiled Tuesday.

($1 = 0.8881 euros)