Societe Generale Plans Job Cuts in Securities Services and Considers Newedge Acquisition

Societe Generale plans to cut 375 jobs in its securities services division across Europe in response to uncertain economic conditions and to meet regulatory capital requirements.

In a staff union letter obtained by Reuters, it was revealed the cuts would impact mainly France with a further hundred planned for the bank’s other branches including Italy, Luxembourg, Germany and Ireland.

At the beginning of the year, Societe Generale announced a group transformation plan to adapt its business to economic and regulatory challenges facing banks in Europe.

A second union source told Reuters that Societe Generale was planning to cut nearly 275 jobs in France. As part of the plan, the bank is separately considering cutting almost 700 mostly back office jobs in Paris.

Union officials also noted the bank was looking at 420 voluntary departures.

Societe Generale declined to comment.

The securities services division of the Societe Generale’s Corporate and Investment Bank saw its assets under custody increase by 7.7% to €3,609 billion in the third quarter of this year compared to the end-September 2012. Assets under administration increased by 11.6% over the same period to €500 billion.

Brokerage firm Newedge retained a stable market share (11.9%) in the first nine months of 2013 versus the first nine months of 2012 in a bear market environment and despite a backdrop of restructuring.

At €224 million, securities services and brokerage revenues decreased by 9.7% in Q3 compared to Q3 2012, due to the decline in brokerage revenues. The businesses continued with their operating efficiency initiatives, says Societe Generale, which helped reduce operating expenses decreased by 4.6% compared to the third quarter of 2012.

In addition to announcing its latest results, Societe Generale says it has entered into exclusive negotiations with Credit Agricole to acquire the additional 50% stake in Newedge, their commonly owned joint-venture focused on derivatives brokerage, which would bring its shareholding to 100%.

“This transaction would enable us to give our clients access to an integrated offer across global markets, from execution to prime and clearing services on both listed and OTC products”, said Didier Valet, head of the division. “In addition, due to the evolution of the regulatory framework, we want to invest in post trade activities in order to enlarge our client offer.”

The financial terms under discussion in the exclusive negotiations between Societe Generale and Credit Agricole are as follows:

– Societe Generale would acquire from Credit Agricole the remaining 50% stake in Newedge, for a consideration of €275m. In parallel, Societe Generale would sell to Credit Agricole a 5% stake in Amundi, their jointly owned asset management company, for an amount of €337.5m, taking Societe Generale’s stake in Amundi from 25% to 20%.

– At closing, these transactions would result in a net impact on the Group’s earnings expected to be positive and an approximately 10 bps negative impact on the Group’s Basel 3 Core Tier One ratio.

The completion of the project is subject to a final agreement between the parties, the authorization of the relevant regulatory bodies and the consultation with the workers councils in France.