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France's SocGen seeks to boost investment bank returns

By Reuters

PARIS (Reuters) -Societe Generale plans to pare back risk exposure in its global markets business and focus more on financing and advising on deals under a revamp of its investment bank announced on Monday.

The lender is looking to boost profitability in the division and stabilise revenue, after its flagship equities business, long a strength, was hit hard during the COVID-19 pandemic last year when companies suspended or cancelled dividends.

France’s third-largest listed bank said it would target a more sustained and profitable growth of its corporate and investment banking businesses with a rebalancing between market activities, its more profitable but riskiest franchise, and financing and M&A advisory.

SocGen is generally a second tier player when it comes to advising on mergers and capital raising globally. Last year it ranked 19th globally for advising on debt raising according to Refinitiv data, though it has a stronger presence in areas like green equity deals and asset finance.

The bank’s shares rose 1.7% at the market open before retreating to last trade at 0.5%.

The French bank said it targeted a return on normative equity of more than 10% in its global banking and investor solutions businesses from 2023, up from 7% now.

The lender also said it targeted a cost base of between 5.5 billion to 5.7 billion euros ($6.93 billion) in 2023 in its global banking and investor solutions businesses, from around 5.8 billion euros in 2020, as it presses on with previously announced savings.

SocGen’s chief executive Frederic Oudea has accelerated an overall revamp of businesses underway since 2018, in one of his last chances to shore up his legacy before his term expires in 2023.

The bank’s shares have risen 46% so far this year after falling near 30-year lows in 2020, boosted by a rebound in its markets business and expectations loan losses caused by the pandemic will be lower than previously forecast.

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

($1 = 0.8223 euros)

(Reporting by Matthieu Protard and Sudip Kar-Gupta, Editing by Sarah White and Emelia Sithole-Matarise)