The French bank launches a two-fold reorganisation to ensure ‘profitable and sustainable growth’
Société Générale has launched ‘two adjustment projects’ after its growth and profitability targets were hit by global market conditions in Q4 2018. The French bank announced yesterday that it will concentrate its wholesale business model on its areas of strength where it has sustainable and differentiating competitive advantages. The new plan has been submitted for consultation to the employee representative bodies in France and Europe.
The first reorganisation is strategic and relates to its Global Banking & Investor Solutions businesses, which houses the bank’s global markets division. Going forward SG will focus on investment and financing solutions, by drawing on its equity derivatives and structured products global footprint.
As part of the move, the bank will close its over the counter (OTC) commodities business with the exception of the management of listed and index products on underlyings commodities business, as well as its Descartes proprietary trading subsidiary. The reorganisation includes a review of its flow activities (cash and flow derivatives) especially in the rates, credit, currencies and prime services businesses ‘to make them more profitable’.
Under pressure after a disastrous performance of the bank’s global markets division in the last quarter of 2018 which resulted in the exit of its head Frank Drouet, and a downsizing exercise which includes slashing €8 billion of risk-weighted assets and an additional €500m of costs and a review of its ‘less profitable’ fixed-income and currencies business, CEO Frederic Oudea (pictured), reviewed all the activities of corporate and investment banking with the aim of restoring the ‘business’ profitability above the cost of capital’.
Following the reallocation of its resources towards the most relevant clients-offers- geographies mix for its clients, SG will also reshuffle its asset & wealth management as well as its securities services, ‘to better leverage resources towards core franchises while reducing costs’. The French bank will also adapt associated support functions as well as Group Central Functions in order to reflect all these adjustments and improve their operational efficiency.
In particular, dedicated operations and IT entities would accelerate their digital transformation in the context of its Global Banking & Investor Solutions’ platform strategy.
Société Générale issued more than 167,000 structured products including non-retail and flow, with estimated global sales of US$12.9 billion globally in 2018. The French bank has over 488,000 live products across jurisdictions with an estimated value of over US$24 billion.
New entity
The second leg of the reorganisation is operational and covers the head office structure for its international retail banking & financial services activities. In financing & advisory, the French bank plans to strengthen the alignment of its teams and its offering in order to pursue its growth plan.
As a result of this decision, two business units covering client relationship, investment banking and financing activities will be merged into a new entity that will ‘optimise its client portfolio and its geographic presence, by leveraging on the strength of its coverage and its leadership in structured finance’.
The bank is seeking to leverage its ‘leading position in Europe, the depth of its corporate client portfolio, as well as its global franchises in equity derivatives and structured finance’ to position itself ‘as a provider of high value-added solutions, drawing on its financial engineering expertise that forms the core of its DNA’.
‘This more focused business model would enable to strengthen its consistency and the Group’s strategic positioning,’ stated the bank.
The contemplated organisational projects would be implemented following the consultation with the French employee representative bodies, which is expected to be completed by the third quarter of 2019. In total, these projects could lead to a reduction of close to 1,600 jobs globally, including around 750 in France.