SocGen takes Q3 hit from restructuring, lifts capital buffer

Credit: REUTERS/Christian Hartmann

Societe Generale said on Wednesday it had set aside three-quarters of the cash needed to deliver a planned dividend payout this year as it reported a 34.8% drop in quarterly net profit, marked by weakness in its trading business.

Updates with details, CEO quote

PARIS, Nov 6 (Reuters) - Societe Generale SOGN.PA said on Wednesday it had set aside three-quarters of the cash needed to deliver a planned dividend payout this year as it reported a 34.8% drop in quarterly net profit, marked by weakness in its trading business.

Chief Executive Frederic Oudea cited progress in his efforts to overhaul the bank's balance sheet, as the lender has exited Serbia and Moldova and freed up capital at its corporate and investment banking unit.

"We have achieved results very much in line with our objectives and priorities," Oudea said in a statement.

The bank continued deleveraging by reducing risk-weighted assets, which will allow it to use the funds to support business or to return them to shareholders. Its common-equity tier-one ratio - a key measure of financial health - rose to 12.5 percent at end-September.

Revenue from trading financial instruments and providing funding to investors fell by 7.6 percent in the third quarter, which had "the first full quarter of lost revenue from business closures", the bank said.

SocGen's corporate and investment banking unit is in the middle of a restructuring, as Oudea seeks to improve the business' profitability by exiting some businesses, such as proprietary trading, as well as downsizing commodities trading and fixed-income prime brokerage.

SocGen is focusing on businesses where it competes successfully on the world stage such as equity derivatives, where it ranked third globally in 2018, according to Coalition data.

It said structured finance and transaction banking activities performed well, but revenue fell at global markets and investment banking units.

SocGen fixed income trading revenue was up 1% in the third quarter, while equity trading revenue fell by 20.1%.

Its close investment banking rivals in Europe, such as BNP Paribas, Barclays and Credit Suisse reported strong gains in fixed-income trading revenue.

Equity trading revenue fell by 15% at BNP Paribas, rose by 5% at Barclays and by 7% at Credit Suisse.

"Global Banking & Investor Solutions delivered resilient net income in an unfavourable environment, without yet benefiting from the positive effects of the ongoing restructuring which is ahead of its 2020 objectives," Oudea added.

SocGen reported third-quarter net profit of 854 million euros on Wednesday, down from 1.31 billion euros in the same period in 2018, when results were boosted by a stake sale.

That compared with expectations for a figure closer to 967 million euros, according to a Reuters survey of four analysts.

($1 = 0.9030 euros)

(Reporting by Maya Nikolaeva; Editing by GV De Clercq, Stephen Coates and Saumyadeb Chakrabarty)

((maya.nikolaeva@thomsonreuters.com; +33 1 49 49 53 39;))

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