Four days after reporting the best first quarter results its equities sales and trading business since 2015 after 2020's Q1 wipe out, French bank Société Générale was back this morning with an investor day.
The bank has big plans for the future, including a target return on normalized equity of 10% across the bank from 2023 compared to historic single-digit returns in recent years, plus a €450m reduction in the cost base of its global markets business by 2022-2023. Last year, SocGen derisked its structured products business following big losses in equity derivatives in the first two quarters, and made 640 job cuts as a result. Speaking today, the bank's global head of equities, Alexandre Fleury, said SocGen had reduced risks in its structured products business by nearly 70%, but kept its world leading position in the market.
As it pursues sustainably high returns, SocGen says it's shifting risk weighted assets from its global markets and investor services business into financing and advisory, where it thinks value creation for shareholders will be higher. "We don’t intend to have a situation where we would have 15% returns somewhere paying for 2% returns somewhere else," said Slawomir Krupa, chief executive officer of Societe Generale for the Americas, who fronted today's presentation.
The new focus on financing advisory implies some additional hiring in new areas. Pierre Palmieri, head of global banking and advisory at SocGen, said the bank plans to focus on sectors like telecoms media and technology (TMT), plus healthcare and renewables, while a focus on environmental social and governance (ESG) issues will infuse everything the bank does. Krupa said the bank will pivot away from hedge fund and banking clients in favour of corporates, financial sponsors and long only investors.
"We want to grow in areas we are already strong," said Krupa, adding that Asia will be an area of focus and will benefit from additional capital allocation as the bank focuses on structured capital solutions and ESG opportunities in the region.
Krupa said that as SocGen moves to "infuse cost control and efficiency in the very fabric of our culture,” it's also busy automating processes wherever possible. It's moved some processes onto the public cloud to facilitate the rollout of artificial intelligence and is investing in blockchain technology. It's also made its equity derivatives analytics system directly accessible to clients.
It's not all good news for technology jobs at SocGen, however. Krupa also said today that the French bank is busy offshoring and nearing shoring its technology function and that it's cut costs by merging its operations and technology divisions. In the process, he said it's integrated its "developer and producer teams" with the result that it now has 30% fewer IT managers than before.
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