SocGen ponders merger of French banking units in push to regain profitability

Last modified September 23, 2020. Published September 23, 2020.

Société Générale Group is considering a consolidation of two key subsidiary banks, a merger that could boost the firm’s retail lending business as it seeks to rebound from surprise losses in the first half of the year.

The Paris-based firm said Wednesday that it has launched a study to assess the possibility of merging its two French banking networks, Crédit du Nord and Société Générale. The lender is mulling its next steps following heavy first-half losses, a management shake-up and questions about CEO Frédéric Oudéa’s future at France’s third-largest bank.

Société Générale said the study would investigate how the bank could structure the combined retail unit in order to strengthen decision-making power at the local level and bring services closer to more of its clients, features that the bank said could make it more profitable.

Sébastien Proto, deputy general manager of French retail banking for Société Générale Group, will finish the review by the end of November, the lender said.

According to Société Générale, the proposed merger would yield a unified retail bank with 10 million clients and “renewed ambition” for greater efficiency. The lender would accelerate Société Générale’s digital strategy and improve services for its individual and corporate clients, it said.

It would also capitalize on “strong complementarity” between Crédit du Nord’s and Société Générale’s geographic footprints, the bank added. The two networks have more than 2,400 branch locations between them, with Société Générale’s concentrated mainly in cities and Crédit du Nord’s mostly outside of France’s metro areas.

“In the current demanding environment, [Société Générale] Group is actively preparing the next stage of its strategy with the new general management team” to speed up restructuring initiatives and strengthen the business model of a diversified banking group, Oudéa said.

French retail banking accounts for a third of overall revenue at Société Générale, Reuters reported.

The lender reshuffled much of its senior management following a surprise EUR 1.26 billion ($1.48 billion) loss in the second quarter, its worst showing since 2008. In response, Oudéa said Société Générale would cut back on risk-taking structured equities products and cut EUR 450 million ($529 million) in costs by 2022.

That cost-cutting pledge has since landed the chief executive in hot water with unions and politicians representing Société Générale employees, who are reportedly concerned that the proposed bank consolidation might mean layoffs are coming.

According to Société Générale, the two subsidiaries employ a total of about 28,900 people.

Oudéa may also be at risk of losing his post atop the lender. His term as CEO officially ends in 2023, but Bloomberg reported that an ouster could happen before then if recent changes don’t turn the business around.

--Additional reporting by Theo Wayt