Societe Generale SA is pulling back from the U.S. mortgage-bond business just two years after building out the unit, according to two people with knowledge of the matter.
The French bank is instructing traders of U.S. government-backed mortgage bonds to stop buying the securities, said the people, who asked not to be identified because the matter is private. The directive comes as senior executives at the lender discuss scaling back from the $5.4 trillion market, the people said.
Jim Galvin, a spokesman for the bank, declined to comment.
Societe Generale has seen a number of mortgage-bond traders depart over the last year, including Tae Park, a managing director who was charged with putting together the team in 2014. The bank aimed to “grab market share” as competitors such as Barclays Plc, Royal Bank of Scotland Group Plc and Morgan Stanley retrenched from the business, Park said at the time.
“Banks are discovering the returns don’t necessarily justify being in these businesses anymore,” said Gerard Cassidy, the head bank analyst at RBC Capital Markets. “This is a transition period, where global banks are picking a niche, rather than being everything to everyone.”
The French bank has tried pressing in on other U.S. structured debt markets in recent years. It created a U.S. commercial mortgage-bond team based in New York last year by hiring more than 10 people from Royal Bank of Scotland.
Societe Generale sought to “develop asset-backed product capabilities that will take advantage of a trend towards increased securitization to finance the economy,” according to a statement at the time.
The bank’s SG Americas Securities LLC unit was named in 2011 as one of the primary dealers required to bid at Treasury auctions and able to trade with the Federal Reserve.