PARIS (REUTERS) - French bank Societe Generale suffered a drop in first quarter net profits after a weak 2018 had prompted the bank to lower its financial goals and embark upon a broad restructuring plan.
Net profit fell 26 per cent to 631 million euros (S$960.8 million), while its overall revenues shrank 1.6 per cent to 6.19 billion. Analysts polled by Infront Data expected a net profit of 637 million euros out of revenues of 6.07 billion euros.
SocGen, as the bank is called, said profits from its domestic retail bank shrunk 13 per cent for the first quarter while its corporate and investment banking arm posted a 16 per cent profit decline.
Last month the bank unveiled a strategy to protect its profitability, in a plan that included closing down businesses, cutting 1,600 jobs, disposing assets and freeing up to 10 billion euros in capital.
Major European banks such as SocGen have struggled to drive up profits because low interest rates have constrained returns from retail banking, while corporate and investment banking is vulnerable to financial market volatility.
SocGen's performance contrasted poorly with those of its cross-town rival BNP Paribas, which earlier this week reported higher profits.
Nevertheless SocGen's restructuring plan - launched after a market meltdown hit its bottom line in the fourth quarter - is bearing fruits, said the bank's chief executive Frederic Oudea.
The bank has first focused on its solvency ratio, bringing the so-called common equity tier one ratio up to 11.7 per cent, from 11.2 per cent a quarter earlier. Analysts had forecast the ratio standing at 11.3 per cent.
As part of its plan to boost solvency, SocGen also announced the sale of its Slovenian bank to Hungarian rival OTP Bank. SocGen will book a 67 million euro loss on a sale that will nevertheless improve its balance sheet by reducing its risk-weighted assets by 2.3 billion euros.
However, SocGen will book between 250 million euros and 300 million euros in restructuring costs this year for 500 million euros cuts in costs, mainly next year.
Shares of SocGen have underperformed compared to the industry with a 2 per cent increase so far this year, while the banking index has gained 12 per cent.