By Matthieu Protard

PARIS (Reuters) – Societe Generale on Monday announced its intention to reorganize its corporate and investment banking activities by allocating resources to trading and reducing the exposure of its commercial arm to market fluctuations.

France’s third-listed bank said it was looking to boost the profitability of the investment banking division and stabilize its income after its flagship equity derivatives business, long a force, was hit hard during the COVID-19 pandemic last year.

“Global Markets will offer … a more predictable performance,” SocGen’s head of global markets, Jean-François Grégoire, told analysts.

Slawomir Krupa, head of SocGen’s World Bank and Investor Solutions division, told reporters the bank has no plans to shut down as part of the surge in profitability.

“Going forward, cost reductions will come from working on the cost structure,” Krupa said.

The bank seeks to develop its advisory business, where it is currently a second-tier player in M&A and capital raising advice globally, behind most of the major US and European investment banks. .

Last year, it ranked 21st globally for debt raising advice, according to data from Refinitiv, although it is more present in areas such as green equity transactions and asset financing.

Krupa said the bank will expand its financing and advisory business, mainly through organic growth.

SocGen shares were up 2.73% at 11:55 a.m. GMT.

SOCGEN TARGETS REDUCTION OF COST BASE

The bank said it is aiming for a normative return on equity of more than 10% in its global banking and investor solutions business from 2023, up from the current 7%.

The lender also said it is targeting a cost base of between € 5.5 billion and € 5.7 billion ($ 6.69 billion to $ 6.93 billion) in 2023 in its operations. global banking and investor solutions, up from around 5.8 billion euros in 2020, while it continued with previously. savings announced.

CEO Frédéric Oudea has accelerated a global overhaul of companies underway since 2018, in one of his last chances to consolidate his legacy before his mandate expires in 2023.

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The bank has already left regions where it lacked scale, selling units and businesses in Central and Eastern European countries such as Poland, Bulgaria, Serbia and Albania.

He also abandoned or reduced certain activities of corporate and investment banks (CIBs), such as commodity trading. As part of CIB’s operations overhaul initiatives, SocGen last month entered exclusive negotiations to sell most of its asset management subsidiary Lyxor for € 825 million to Amundi, which was formed after SocGen and Crédit Agricole merged most of their asset management in 2009. SocGen also previously announced its intention to merge its two French retail networks, which will result in branch closures and cost savings. costs.

The bank’s shares have risen 50% so far this year after falling nearly 30 years lower in 2020, boosted by a rebound in its market activity and forecasts of loan losses caused by the pandemic will be lower than previous forecasts.

But SocGen’s market value is still less than half of what it was when Oudea took over in 2008 following huge losses on equity derivatives caused by dishonest trader Jerome Kerviel.

(1 USD = 0.8218 euros)

(Reporting by Matthieu Protard and Sudip Kar-Gupta; Editing by Sarah White, Emelia Sithole-Matarise, Susan Fenton and Jan Harvey)