Less Bank For Your Buck

SocGen plans major cuts

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What's going on?

On Thursday, French investment bank Socit Gnrale revealed, as anticipated, weak fourth-quarter results and major changes ahead.

What does this mean?

In January, SocGen warned that market volatility would hit its fixed income trading revenues as it did those of big US investment banks last quarter. Thursdays release showed that its quarterly earnings fell compared to a year ago and the bank lowered its 2019 revenue growth and profit margin targets. But SocGens got a plan: it announced cuts to its trading businesses, aiming to lower costs by $567 million and it might also sell off other parts of its business.


Meanwhile, rival French bank BNP Paribas announced on Wednesday even bigger spending cuts (alongside its own lower targets). And in the US, Goldman Sachs said itd be cutting parts of its trading business, too. Guess bulking is over…

Why should I care?

The bigger picture: Tough times in Europe.


According to the European Commission, companies will have a tough time growing in Europe this year banks included. The group expects economic growth of 1.5% in 2019, down from its forecast of almost 2% a few months ago. Europes biggest economy, Germany, had its forecast cut but Italy was the biggest loser: its economys now expected to grow just 0.2% this year. Chinas economic slowdown feeding into Europe is partly to blame.



For markets: Looking to the US for bank-spiration.


SocGens challenges in Europe may lead it (and others) to consider mergers. Following Deutsche Banks lead, deals with fellow countrymen seem more likely than those across borders (to avoid regulatory complications). European banks have been sounding out deals for a while but on Thursday, two US regional banks bit the bullet and announced a $66 billion merger. American banks are ahead of their European peers in a few ways and seeing the rising stock prices of the merging US banks could spur their Euro counterparts (whose stocks fell on Thursday) into action.

Originally posted as part of the Finimize daily email.

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