Société Générale is putting the finishing touches on a highway-straddling building in La Defense, Paris’s financial district, designed to house more than 3,000 employees. As the project nears completion, the bank is also negotiating with its unions about the deepest-ever staff reductions at its corporate and investment banking unit. The job cuts “are a symbol” of the broader malaise in the French banking world, says Olivier Godechot, a sociologist at the Paris-based National Center for Scientific Research specializing in finance. “Its job cuts are particularly striking because Société Générale is the leading and most innovative bank on the Paris marketplace.”
BNP Paribas, Société Générale, and Crédit Agricole —France’s three largest banks by market value—expanded after weathering the 2007 subprime mortgage crisis with smaller writedowns than their U.S. rivals. Now they are in full-scale retreat as Europe’s sovereign-debt crisis enters its third year. The banks’ corporate and investment banking (CIB) units, with combined global sales of €25 billion ($32.5 billion) in 2010, are cutting 1,800 jobs in France, or about 10 percent of their staff there.
That’s a fraction of the 240,000 job cuts announced by financial firms globally since the beginning of 2011. Even so, the reductions add to the economic gloom in France, where the unemployment rate is just shy of 10 percent. And the cuts are hitting areas where the banks are global players. “Paris was the center for project finance as well as aircraft and shipping lending, and that proved very fragile,” says Sofiane Aboura, a professor at Paris Dauphine University. “It will be hard for Paris to win back any business leadership it loses.” Société Générale says it aims to “preserve” its global leadership in equity derivatives.
French banks have more exposure to the public and private debt of Greece, Portugal, and other peripheral euro area nations than other foreign lenders. At the end of September, French banks had taken about €5.4 billion of losses on Greek sovereign bonds. Third-quarter net income for BNP Paribas fell 72 percent because of Greek writedowns and losses from selling European government bonds. Société Générale’s profit slid 31 percent, hurt by a Greek writedown and lower trading revenue.
Crédit Agricole’s CIB division is cutting 550 jobs in France and 1,200 abroad as it closes its equity-derivatives and commodity-trading activities. BNP Paribas said in November that it will shrink its CIB staff globally by more than 6 percent, with 373 job cuts at home.
Société Générale, Paris’s biggest CIB employer, began talks with unions in the fall on plans unveiled on Jan. 4 to cut 880, or 14 percent, of the unit’s jobs in France. The bank is also trimming 700 jobs abroad. Spokeswomen for Société Générale, BNP Paribas, and Crédit Agricole declined to comment.
The CIB unit is Société Générale’s backbone, accounting for about 43 percent of its revenue from 2000 to 2011, according to an internal memo obtained by Bloomberg News this month. In August, Société Générale scrapped its €6 billion profit target for 2012. “We wonder whether CIB isn’t being liquidated in pieces,” says Michel Marchet, a union representative at the bank, “and whether we aren’t shooting ourselves in the foot.”