PARIS (Reuters) - Societe Generale (SOGN.PA) is to cut a further 220 million euros in costs from its investment bank to help to boost profitability after a tough start to the year for this business.
France’s second biggest bank reported stronger than expected group profit in the first quarter, bucking the trend for European banks along with rival BNP Paribas (BNPP.PA), which reported robust results on Tuesday.
But Societe Generale’s investment bank struggled. Net income at this division fell by almost 15 percent, while revenues dipped more than 9 percent.
Europe’s banks have had a rocky first quarter in investment banking. Societe General’s investment bank performed more strongly than that of rival BNP Paribas.
The bank said its latest cost cuts would bring planned cost savings to 2 billion euros (1.58 billion pound) between 2012 and 2017, giving it room to invest in growing its businesses.
Philippe Heim, chief financial officer, said the new cuts would involve initiatives in different areas and scrapping non-profitable operations.
“We have made a plan of 128 job cuts in France and abroad and we will use more offshore platforms in Budapest and elsewhere,” he said, referring to the use of locations where costs are lower.
As part of the plan, it will reduce its business involved in UK government bond auctions as well as in the sale and trading of mortgage-backed securities.
The bank said it was confident about the outlook for 2016, having made more guarded comments earlier in the year.
“We expect to increase our EPS (earnings per share) forecasts by about 4-5 percent on the back of this set of results,” Jacques-Henri Gaulard, an analyst at Kepler Chevreux said in a note, welcoming the company’s “resolutely positive” outlook.
Its shares were up more than 3 percent by 0958 GMT. The European banks index was down nearly 1 percent .SX7P.
The bank said its overall net income rose 6.5 percent in the first three months of the year to 924 million euros.
Provisions for bad loans fell in all business lines, except for its investment bank, where it set aside 140 million euros for possible losses in the oil and gas sector versus the 50 million euros it had set aside a year ago.
The bank plans to stick to investment plans for its French retail network, where it acquired more than 1,000 new corporate customers and more than 61,000 clients for online bank Boursorama.
Reporting by Maya Nikolaeva and Julien Ponthus; Editing by Sherry Jacob-Phillips and Jane Merriman