Paris - The French bank Société Générale announced on Tuesday that it was planning a new-cost cutting drive that will lead to hundreds of job losses in France, as its first-quarter net income fell sharply.
The bank, the second-largest lender on the Paris stock market, said it planned 900 million euros, or $1.2 billion, of cost reductions through 2015, adding to the 550 million euros of cuts last year. Severin Cabannes, the bank’s deputy chief executive, told CNBC television that the bank was in talks with its unions about cutting 600 to 700 headquarters jobs, but that there would be ‘‘no forced layoffs.’’
French companies, faced with tough restrictions on firing employees, typically use buyouts and early retirement programs to cut jobs.
Société Générale, based in Paris, said first-quarter net income fell 50 percent from a year earlier, to 364 million euros. That was well below the 674.6 million euro profit that analysts surveyed by Reuters had expected. In contrast, local rival Crédit Agricole reported a 51 percent rise in its net profit, to 469 million euros, on Tuesday, as the firm ended its exposure to Greece that had long weighed on results.
Société Générale said its profit fell largely because it took a charge of around 1 billion euros to revalue the cost of its own debt. The firm’s net banking income fell 19 percent, to 5.1 billion euros.
The French bank said that if it excluded the debt revaluation, legacy assets and one-time charges, it would have had ‘‘solid’’ net profit of 852 million euros. Debt revaluation â€" in which a bank accounts for changes in the market value of its own debt â€" flatters a firm’s results when it comes under stress in the market, but makes results appear worse when the debt rises in value.
Société Générale said its corporate and investment banking business, in particular, “turned in a very satisfactory performance.†The division reported net income of 494 million euros, up 41 percent, as its equity division posted strong results as global stock markets rebounded in the first quarter.
Like its larger rival, BNP Paribas, which last week reported a 45 percent decline in first-quarter net income, Société Générale is facing a moribund European economy and a record-high unemployment rate of 12.1 percent in the euro zone. The ongoing slump subdues demand for loans, even as historically low interest rates hold down the profitability of the the credit that it does extend to customers.
Société Générale’s chairman and chief executive, Frédéric Oudéa, said in a statement that the bank’s latest cost-cutting plan would help it to generate a return on equity, a measure of profitability, of 10 percent by the end of 2015, compared to just 7.4 percent in the first quarter of the year.
Mr. Oudéa also said the bank had reached a ‘‘Basel III’’ core tier 1 capital ratio of 8.7 percent, putting in on schedule to reach the 9.5 percent level that it has targeted for the end of the year. Capital ratios provide an indication of a financial institution’s ability to withstand financial shocks.
While Société Générale announced a new round of cuts on Tuesday, Crédit Agricole, whose revenue fell 26 percent, to 3.9 billion euros, in the first quarter, benefited from finally shedding its exposure to troubled assets in Greece.
In February, Crédit Agricole ‘‘deconsolidated’’ Emporiki Bank, based in Athens, cutting 15.5 billion euros of risk-weighted assets from its balance sheet. Crédit Agricole paid 2.2 billion euros for the Greek bank in 2006, but its losses ballooned to well over 5 billion euros as the Greek economy imploded. Crédit Agricole sold Emporiki last year to another Greek lender, Alpha Bank, for a symbolic 1 euro.
Jean-Paul Chifflet, Crédit Agricole’s chief executive, said in a statement that the results reflected ‘‘resilient revenues and income in the group’s core businesses, a persistently moderate cost of risk and a steady decline in expenses, in a mediocre economic environment.’’
Shares of Crédit Agricole rose 1.2 percent in Paris morning trading. Société Générale shares rose 4.1 percent.
