[PARIS] Societe Generale SA has pledged further cost cuts this year as it seeks to reassure investors that its diversified business could withstand a weak start to the year in investment banking.
France's second biggest listed bank on Wednesday announced additional cost cuts of 220 million euros (US$253 million) at its global banking and investor solutions division, in the face of market volatility in the beginning of the year.
The new cuts take the total planned cost savings to more than 500 million euros by next year.
As part of the plan, it aims at exiting or restructuring a few non-profitable activities, such as UK government bonds primary dealership, mortgage-backed securities sales and trading desk.
The bank said its net income rose 6.5 per cent in the first three months of the year to 924 million euros (US$1.06 billion).
When adjusted for exceptional items, such as the revaluation of SocGen's own debt, net income was down 0.5 per cent to 829 million euros.
Analysts in a Reuters poll had predicted a 7.7 per cent decline in net income to 801 million euros on average. "In 2016, the strength of the diversified business model, additional efforts on costs and solid asset quality should sustain both commercial and financial performances," the bank said.
In early February, the French warned it may not hit a 10 per cent return on equity target this year, which knocked nearly 13 per cent off its shares.
SocGen plans to stabilize its overall cost base this year, while sticking to the recently announced investment plans for its French retail network, where it acquired more than 1,000 new corporate customers and more than 61,000 clients for online bank Boursorama in the first quarter.
Provisions for bad loans fell in all business lines on a year-on-year basis, except for its investment bank, where it set aside 140 million euros for possible losses in the oil and gas sector versus the 50 million euros it had a year ago.
Lower loan loss provisions helped drive income higher in French retail and other markets.
SocGen reported a two-fold rise in net earnings at its international retail and financial services division, which includes operations in Eastern Europe and Africa, on the back of stronger demand for loans.