French banks Societe Generale and Credit Agricole vowed yesterday to keep cutting costs after asset sales and lending cutbacks helped to offset a weak domestic economy in the first quarter.
Banks across Europe are moving to slash spending and cut jobs in the face of tougher rules about capital levels and the uneven post-crisis economic recovery.
SocGen, France’s number two listed bank, said it would cut 900 million euros ($1.18bn) in costs over the next three years in order to reach a new return-on-equity (ROE) target of 10 per cent, an increase of 2.6 points.
Smaller listed rival Credit Agricole, which is more exposed to the French economy via its parent network of regional retail banks, reiterated its bid to cut 650 million euros by 2016.
While both banks suffered from shrinking group revenues, rising French loan losses and market jitters over Cyprus and Italy in the quarter, they also cut overall expenses and booked gains from selling business units in a bid to shore up solvency.
“What is impressive is SocGen’s capacity to cut its cost base,” said Yohan Salleron, fund manager at Mandarine Gestion. “The target they announced is pretty significant.”
SocGen is in talks with unions to cut 620 staff at its central back-office operations, chief financial officer Philippe Heim said. It was reported last month that the bank was considering between 600 and 700 job cuts. Larger domestic rival BNP Paribas, Germany’s Deutsche Bank and Switzerland’s UBS have also announced cost-saving plans to help fight the rising cost of doing business.