PARIS (Reuters) – Societe Generale has reshuffled its management team and will seek cost cuts after swinging to a wider-than-expected fourth-quarter loss on the back of a weak euro zone economy and one-off charges.
France’s No. 2 listed bank said finance chief Bertrand Badre – who is stepping down to join the World Bank after only a year in the job – would be replaced by his deputy Philippe Heim, while Jacques Ripoll, head of its GIMS asset-gathering division, was leaving the group, as Reuters reported on Tuesday.
The bank pledged to cut costs over the next three years with its new team and promised to put in place a revamped structure, without giving numbers or targets.
“2013 will bring more visibility … Our corporate and investment bank should gain market share,” Chief Executive Frederic Oudea told journalists. “We will put in place this new organization (and) give further details to the market.”
SocGen shares fell more than 3 percent and were the steepest decliners in the European bank sector, with analysts citing weaker than expected results even after the bank had already warned the quarter would be hammered by one-off items.
“Although management has dealt convincingly with concerns about weak capital adequacy and liquidity in 2012, SocGen is still struggling to convince investors that it can achieve improved returns,” Espirito Santo analyst Andrew Lim wrote in a research note, reiterating his “hold” recommendation on the stock.
Like most of its peers, SocGen is under pressure to rethink its business model to boost profits in a post-credit crunch world of tougher regulations, volatile financial markets and government budget cuts.
Elsewhere in Europe, banks including Barclays and UBS have also launched radical overhauls, quitting business lines and cutting jobs.
ONE OFF CHARGES
SocGen racked up a quarterly net loss of 476 million euros ($641 million), it said on Wednesday, compared with a net profit of 100 million for the same period a year earlier. Analysts had been expecting a loss closer to 237 million, according to a Reuters poll of eight banks and brokerages.
The bank blamed “significant” one-off quarterly charges, which it had flagged last month as accounting losses on the value of its own debt and a goodwill writedown for its Newedge brokerage joint venture with Credit Agricole.
It also warned of the weak economic backdrop in Europe, citing rising loan-loss provisions at its French and Romanian operations, and said Russian unit Rosbank had lost money in 2012.
One unexpected charge was a 300 million euro legal provision booked for 2012. SocGen gave no details about the charge and CEO Oudea told journalists it was a precautionary measure rather than one linked to any specific matter.
Pressed on the bank’s internal inquiry into whether it played a role in the Libor rate-fixing scandal that has engulfed several banks, Oudea declined to comment and said there was nothing new to add.
“A messy set of fourth-quarter figures, with multiple exceptional items,” said a Paris-based trader, citing the litigation provision as a negative surprise.
The bank will pay a dividend of 0.45 euros per share, after skipping a shareholder payout last year, having reached the end of a year-long drive to beef up its balance sheet by selling assets, cutting costs and laying off staff.
The drive helped bring costs down at SocGen’s corporate and investment bank, a key division for the group, which saw a revenue rebound in 2012 in fixed-income trading and sales as investors and companies flocked to the bond market.
Shares of SocGen are up 11 percent year-to-date, compared with a 8.7 percent rise for the STOXX Europe 600 banks index.
($1 = 0.7427 euros)
(Editing by David Holmes and Mark Potter)