`The Cost Of Firing People Is Increasing'
Soft-spoken and self-effacing, Marc Vienot describes himself as "just a bank chairman." But few bank bosses wield anywhere near Vienot's clout. As head of France's Societe Generale, the biggest publicly owned French bank and the 15th-largest lender in the world, Vienot commands some $288 billion in assets and a branch network stretching from Toulon to Tianjin. But sheer bulk isn't enough these days. S.G. Warburg Securities Ltd. estimates that overhead eats up a hefty 66% of the bank's earnings--only the troubled Credit Lyonnais, at 71%, is worse off among French lenders. Such high expenses could leave Societe Generale behind other global competitors. So Vienot is mounting a tough campaign to shed thousands of Societe Generale's 24,000 branch employees in France, while increasing the bank's lending and securities trading in the U.S., Eastern Europe, the former Soviet Union, and Asia. While in New York to visit with investors on June 28, Vienot took time out to chat about his bank and the global economy with Senior Writer William Glasgall and Money & Banking Editor Kelley Holland.
Q How big a problem is the sinking U.S. dollar right now?
A The weakness of the dollar is a burden for everybody. How can we get out of this? I would exclude one solution, which would be to raise [U.S.] interest rates. That would make things worse. Perhaps another solution would be a decrease in short-term interest rates in Europe. That's a delicate issue. I think it's possible, but we've been disappointed so many times.
Q Do you see signs of an economic recovery in France?
A To be frank, not yet. Our deposits are rising faster than our loans. But this doesn't mean there won't be a recovery. Corporations are very liquid, and their balance sheets are much sounder than they were previously. They can start investment programs without demand for credit increasing. And we see some signs of activity in real estate loans, which in the first half were nearly 40% above the previous year, and consumer credit is now about twice its level of one year ago.
Q Tell us about your plan to cut jobs in your 1,800 domestic branches.
A How will we reduce our staff by 2.5% a year for three years in a row? It was difficult last year, because unions were not favorable, the government was not helping very much--we already have a high unemployment rate--and the cost of firing people is increasing. Culturally, it was difficult for Societe Generale to threaten employees with firing for the first time. But we didn't have to. We got more than the 2.5% we were aiming for. In 1994 we set up a system for voluntary departures without the threat of firing people. We will be successful. For the next 2.5% [in 1995], I see no reason for us not to be able to do that, but it's becoming more difficult.
Q You were the first French state-owned bank to go public. How long will it be before you have a level playing field?
A There is still some distortion to competition that I hate. But things are improving. Credit Agricole is now on its own and has a huge amount of capital. BNP [Banque Nationale de Paris] has joined the privately owned banks, as have [Compagnie de] Suez and [Compagnie Financire de] Paribas. Credit Lyonnais is state-owned, but it aims to be privatized. It may take more time than [Chairman] Peyrelevade believes, but in three or four years, why not?
Q Where are the opportunities globally?
A One of the first meetings of our executive committee this year was on Southeast Asia, where we already have a decent position. The question was, how could we expand it? The big question mark is China. We decided to [increase our potential exposure] to a substantial level. We are now in Beijing, Guangzhou, Shenzhen, Tianjin. We control an investment bank in Shanghai, and we intend to open one branch a year. It's a big risk, but it's worthwhile.
Q How do derivatives fit into your strategy? And what of their risks?
A Today, derivatives represent one-third of our capital-markets business in terms of gross income. I'm not very concerned about derivatives, perhaps because I'm too optimistic about the issue. Those products are complicated, of course, but as they become more familiar, people will understand them better. Perhaps there should be better presentation [of derivatives positions] in bank accounting. But I am not in favor of regulation or general control of these products. Such measures wouldn't be practical.