PARIS • Unlike its US peers, Societe Generale swung to a surprise €1.26 billion (S$2.04 billion) loss for the second quarter because of charges at its trading unit, extending a losing streak that is set to increase pressure on chief executive officer Frederic Oudea.
The French lender posted almost €1.33 billion in one-off costs following a review of the global markets and investor services business, including a €684 million writedown. That capped a tough period for the bank, which saw revenue from equities trading plunge 80 per cent after structured products were hit for a second straight quarter.
Mr Oudea, already under pressure after an unexpected first-quarter loss, is cutting risks and seeking to raise profitability while trying to maintain the bank's leading position in equity structured products. Equities trading took a €200 million hit in the second quarter related to companies cancelling dividends because of the coronavirus pandemic, offsetting a 38 per cent rise in fixed income trading.
Mr Oudea, the longest-serving leader of a top European bank, is accelerating a transition towards simpler products at the investment bank that will see a fall in revenue. The bank said it also expects to cut costs by as much as €450 million by 2022 at the unit.
The French firm's biggest rival, BNP Paribas, rebounded from a first-quarter profit warning and stock trading hit with a blowout performance in fixed income. Revenue from trading fixed-income securities, currencies and commodities jumped 154 per cent in the second quarter from a year earlier, offsetting a more than 53 per cent fall in equities trading.
SocGen set aside about €1.28 billion in the second quarter to cover the cost of loans going sour, higher than the €820 million in the first three months.
It is closing its trade commodity finance unit in Singapore after the collapse of oil trader Hin Leong Trading, which owed SocGen US$240 million (S$330 million), Bloomberg reported last week.
The results signal that SocGen only partially benefited from a broad-based market rally that helped its US peers double revenue in fixed-income trading. Overall, Wall Street banks' trading and deal-making businesses had their best quarter in modern history, with US$45 billion in revenue. Still, they and their European counterparts have warned that conditions will probably be less advantageous in the second half.
BLOOMBERG
