GLE Societe Generale SA

--SocGen Swung to a first-quarter loss of EUR326 million compared with a profit of EUR686 million a year earlier

--Provisions for bad loans more than tripled, reaching EUR820 million

--Equities revenue shrank 99% to just EUR9 million

 
   By Pietro Lombardi 
 

Societe Generale SA said it will cut costs further this year after it swung to a loss in the first quarter as the bank set aside more provisions and the market volatility sparked by the coronavirus pandemic hit the performance of its investment banking operations.

Like its European and U.S. peers, France's third-largest listed bank by assets is bracing for the economic impact of the pandemic and set aside more money to cover potential loan losses.

Provisions for bad loans more than tripled, reaching 820 million euros ($890.3 million).

Higher provisions, compounded by a sharp revenue fall, led to a quarterly loss of EUR326 million compared with a profit of EUR686 million a year earlier.

Net banking income, the bank's top-line revenue figure, fell almost 17% to EUR5.17 billion.

The bank gave a bad surprise this morning, Citi said, mentioning the extent of the weakness in investment banking, the high provisions and the expected reduction in capital buffer.

SocGen shares fell 3.9% at 0713 GMT, after opening more than 5% lower.

The results of the bank's global banking and investor-solutions business, which includes investment banking and asset management, weighed on the performance. The division swung to a loss of EUR537 million from a profit of EUR140 million, and posted a 27% decline in revenue. Equities revenue collapsed, falling 99% to just EUR9 million.

"Revenues from structured-products activities were severely impacted by the equity markets dislocation in March, the cancellation of dividend payments... and by counterparty defaults," it said.

The bank's core Tier 1 ratio, a key measure of capital strength, fell to 12.6% in March from 13.2% in December, the latter including the cancellation of dividends for last year. This represents a buffer of 350 basis points over regulatory requirements. By the end of the year, SocGen expects this to fall to between 200 and 250 basis points, also depending on the distribution of an extraordinary dividend.

The bank targets further cost cuts of up to EUR700 million this year. It sees cost of risk of between 70 and 100 basis points, depending on the evolution of the pandemic.

"Beyond our focused adaptation to the immediate impact of the crisis, we are already working on the designs of our next strategic plan 2021-2025 to take into account the new environment postcrisis," Chief Executive Frederic Oudea said.

The lender launched last year a plan to cut nearly 1,600 jobs globally after a slump in investment-banking revenue at the end of 2018.

Write to Pietro Lombardi at pietro.lombardi@dowjones.com

(END) Dow Jones Newswires

April 30, 2020 03:58 ET (07:58 GMT)

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