SocGen Posts Second Quarterly Loss in a Row on Soaring Provisions, Impairments -- Update

--SocGen posted an unexpected quarterly loss amid soaring bad-loan provisions and impairments related to its trading operations

--The French bank swung to a net loss for the period of EUR1.26 billion

--The bank aims to cut costs at its trading operations by roughly EUR450 million by 2022-23

By Pietro Lombardi

Societe Generale SA vowed to cut costs at its trading business after the lender swung to an unexpected loss in the second quarter as it set aside more money for potential loan losses and posted writedowns related to its trading operations.

SocGen's provisions for soured loans increased more than fourfold, mirroring a trend seen at other U.S. and European banks bracing for the economic impact of the coronavirus pandemic. France's third-largest listed bank by assets stowed away 1.28 billion euros ($1.51 billion) for provisions, up from EUR314 million a year earlier.

Results were also dragged by impairments related to its global markets and investor services business, which includes fixed-income and stock trading. The lender posted charges of around EUR1.33 billion, of which EUR684 million was goodwill impairment.

The bank said Monday that it will cut costs at its trading operations by roughly EUR450 million by 2022-23, but that it wants to keep a strong position in equity structured products. However, the restructuring will hit revenue at the business, seen declining by EUR200 million to EUR250 million.

The move comes after another difficult quarter for stock trading, with equities revenue down 80%. Companies that canceled dividend payments because of the coronavirus dealt a EUR200 million blow at its structured product operations. "These activities saw a gradual recovery from mid May," it said. The weak performance in stock trading follows an even tougher first quarter, in which equities revenue collapsed.

Like other peers, fixed-income revenue rose significantly in the quarter, posting a 38% increase.

Net loss for the period was EUR1.26 billion compared with a profit of EUR1.05 billion a year earlier, the French bank said.

Net banking income, the bank's top-line revenue figure, fell almost 16% to EUR5.30 billion.

Analysts had forecast quarterly profit of EUR139 million on revenue of EUR5.45 billion, according to a consensus forecast provided by FactSet.

SocGen said it expects cost of risk for the year to be at the bottom of its 70 basis points to 100 basis points guidance. Capital is seen at the top of the 11.5%-12% range. The bank targets underlying costs of about EUR16.5 billion for this year, down from EUR17.4 billion last year.

"While April and May were heavily impacted by the reduction in activity of numerous economies around the world, the rebound in activities from mid-May is very encouraging," Chief Executive Frederic Oudea said.

"The group is already working on new initiatives to build its next strategic stage."

Write to Pietro Lombardi at [e-mail]; @pietrolombard10

(END) Dow Jones Newswires

August 03, 2020 02:44 ET (06:44 GMT)

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