French bank Société Générale said Tuesday it will cut costs across the business in light of losses incurred from COVID-19, with some changes in its €600-€700 million plan expected to remain permanent into the future.
The pandemic's impact on SocGen's retail banking activities peaked in April and May, with a “strong decrease” in daily banking services and most credit activity focused on state loans and moratorium. But with lockdowns slowly ending, credit volumes are beginning to grow again, SocGen's CEO Frédéric Oudéa said in a report to investors.
France’s third-largest bank by assets is decreasing its 2020 overall cost base by introducing a net cost savings plan. It noted that general regulatory costs have increased alongside an estimated €100 million in costs related to COVID-19.
"Looking to the additional cost savings, we will draw the lessons of the crisis and adapt the way we work. Part of the savings will be permanent, at this stage it is too early to quantify,” SocGen said.
The bank has struggled with market dislocation in the first quarter, with dividend cancellation, hedging costs and counterparty default having a strong impact on its reserves. More dividends were canceled in April, and then recovered in May "under strict constraints on production and with intense hedges rebalancing due to sharp market evolutions."
Moving forward, SocGen expects a gradual normalizing of market parameters, but said it will probably happen more slowly than anticipated. Banking activities and financial services are also picking back up and recovering thus far in June.
As a multinational investment institution, SocGen is a major player in dividend futures and structured products. In the report, SocGen said it will review its products to assess changes needed to prepare for any future crises.
"We will perform a thorough review of our structured products [offered] to limit the risks in case of extreme market dislocation. This could be done, for example, by diversifying our offer [or] adding new easier-to-manage products, thanks to our strong innovation capabilities," the bank said.