Societe Generale has announced that it would resort to further cost cuts and will shed an additional €220m (£174.19m, $252.66m) at its global banking and investor solutions division by 2017. The French Bank revealed the plan on 4 May after announcing its first quarter results.
The company reported a 15% decline in profit in the first three months of 2016. However, the cost cuts are part of a broader plan that allow the bank to adapt to market conditions such as stringent regulation, low interest rates and volatile global financial markets.
The cost cutting measures are not the first for Societe Generale. In 2015, it had announced plans to cut €850m across the group that led to hundreds of job redundancies in France. The bank said that it aims to reduce its retail branches in its home country by 20% by 2020 and may consider to save costs by exiting or restructuring a few of its non-profitable activities such as UK government bonds primary dealership, mortgage-backed securities sales and trading desk.
Nonetheless, the overall first quarter results of the bank were in the positive. The Paris-headquartered bank claimed that its net income increased 6.5% in the first quarter of 2016 to €924m. While the results exceeded analyst's expectations, it came primarily because of stronger consumer banking. However, net income was down 0.5% to €829m, after adjusting exceptional items such as the revaluation of the bank's own debt.
With regards to these results, the bank said, "In 2016, the strength of the diversified business model, additional efforts on costs and solid asset quality should sustain both commercial and financial performances." Frédéric Oudéa, the chief executive, said: "In a more difficult environment at the start of the year than last year, the group generated solid results."
Apart from its investment banking division, provisions for bad loans declined across all its businesses when compared to the first quarter of 2015. This decline in loan loss provisions helped increase its income in French retail and other markets.
With a strong demand for loans, Societe Generale witnessed a two-fold rise in net earnings across its international retail and financial services division, which includes its eastern Europe and African operations.