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SocGen warns of €570M Q4 charge, unveils 2020 strategic plan

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SocGen warns of €570M Q4 charge, unveils 2020 strategic plan

Société Générale SA expects to book an exceptional charge of around €400 million in the fourth quarter as a result of the reorganization of its French retail banking network.

The bank on Nov. 27 unveiled plans to cut its branch network in France to 1,700 from 2,000, reduce its back-office centers to 14 from 20 and automate 80% of front-to-back processes by 2020. SocGen said the plan could lead to a headcount reduction of around 900 employees, in addition to the 2,250 job cuts previously announced, taking the total number to around 3,450 by 2020.

The lender also expects to book an additional charge of approximately €170 million in the fourth quarter as a result of tax changes.

SocGen also set out its new strategy for the next three years, including generating €3.6 billion of additional revenues by 2020 by prioritizing its high-potential clients and targeting a cost base less than or equal to €17.8 billion through the implementation of its new €1.1 billion cost savings plan.

The bank added that it plans to optimize its capital allocation by selling or closing sub-scale and/or non-synergetic businesses, the impact of which is estimated to be equivalent to roughly 5% of current group risk-weighted assets. The resulting freed-up capital will either be reallocated to businesses or returned to shareholders, SocGen noted.

As part of its 2020 plan, the group will also accelerate the digital transformation of its model to improve operating efficiency and security and will allocate €150 million to innovation projects through equity investments.

In addition, SocGen is targeting by 2020 a group return on tangible equity of around 11.5%, corresponding to a 10% return on equity; EPS of approximately €6.50; a cost of risk of 35 to 40 basis points; fully loaded common equity Tier 1 ratio greater than or equal to 12% and a leverage ratio of between 4.0% and 4.5%.

The group is also targeting a 50% dividend payout ratio and a floor at €2.20 per share, which will apply from 2017.