Paris

SOCIETE Generale SA fell further behind Wall Street rivals with declines in stock and bond trading in the final months of 2020, capping the first losing year for the French lender in more than three decades.

In a bullish quarter for most peers, SocGen saw equities trading - its traditional strength - fall 7 per cent from a year earlier and fixed-income revenue slump 16 per cent. While net income came in higher than estimated as the bank set aside less than expected for souring loans, the trading contraction and restructuring charges resulted in a 258 million euro (S$414.9 million) loss for the year, the first in Bloomberg records going back to 1988.

The results underscore the challenges for chief executive officer Frederic Oudea, who is trying to turn around SocGen after trading losses in the wake of the pandemic exacerbated the impact of rising bad loans and negative interest rates. Mr Oudea is now seeking to reduce risk, cut costs and accelerate a move towards simpler products at the markets unit, while defending a leading position in equity structured products.

The longest-serving CEO of a major lender in the European Union, the 57-year-old has seen shares of SocGen slump by about three-quarters since he took over in 2008. The firm now has a market value of about 15 billion euros, less than Deutsche Bank AG, which has also suffered a long decline from its peak.

William Kadouch-Chassaing, SocGen's head of finance, said in an interview that he saw some improvement at the start of this year, including at the investment bank.

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"Things are definitely starting off the year positively" at the unit, he said in an interview with Bloomberg TV. "Across the board, in retail we still see an impact of the confinement, but it's holding well." He declined to say when SocGen last recorded an annual loss.

In a bid to boost profitability, Mr Oudea is cutting hundreds of jobs at the investment banking unit, merging the domestic retail networks to reduce the number of branches, and looking to sell its 160 billion euro asset management arm Lyxor. He's also ousted two of his top deputies.

The bank booked 210 million euros in charges in the fourth quarter to account for restructuring measures. The costs are adding to a rising bill for souring loans in the wake of the coronavirus pandemic. SocGen set aside 689 million euros for that purpose in the quarter, bringing the total for the past year to 3.31 billion euros. Such provisions should decline this year, it said.

While rivals had to contend with similar challenges, they have been able to rely on their investment banking units to make up for it. In Germany, Deutsche Bank just posted its first annual profit in six years as trading business benefited from a broad-based market rally.

The slump at SocGen's equities desk contrasts with a 35 per cent jump in revenue at the biggest Wall Street banks. In fixed-income trading, Wall Street on average reported 10 per cent higher revenue, and French rival BNP Paribas SA saw debt trading increase 22 per cent. At Deutsche Bank, it was a plus of 17 per cent.

Despite the underperformance, SocGen said it would propose a dividend of 55 euros a share at its next annual meeting, equal to a 470 million euro payout. The bank plans to return a similar amount in the form of share buybacks in the fourth quarter of 2021, provided the European Central Bank lifts its recommendation to cap shareholder returns.

SocGen has been among the most vocal in pushing back against the ECB's decision to cap payouts, with chairman Lorenzo Bini Smaghi saying he didn't see a reason why banks in Europe should be treated differently from counterparts in the UK or Switzerland. BLOOMBERG