SocGen to Dismiss 1,180 in Brazil, Take $229 Million Charge

Societe Generale SA, France’s second-largest bank, will dismiss 1,180 workers in Brazil and book a 200 million-euro ($229 million) charge in the fourth quarter as it exits its Brazilian consumer-finance operations.

The bank will close Units including Banco Cacique and Banco Pecunia, SocGen said by e-mail Tuesday. The decision means 650 workers will be dismissed this month, and job cuts will total about 1,180 after the sale of loans and the bank’s exit from consumer businesses, a spokesman said.

Societe Generale’s expansion in South America’s most populous country has trailed the growth of competitors such as Banco Santander SA. Brazil’s faltering economic growth now threatens to further erode banking profits. Societe Generale’s Brazilian operations represent less than 1 percent of its global revenue, its website shows.

Societe Generale fell as much as 2 percent and was down 1.6 percent at 37.04 euros by 3 p.m. in Paris trading, valuing the bank about 29.9 billion euros. Societe Generale has dropped 12 percent in the past 12 months, compared with the 0.5 percent decline of the 49-member STOXX 600 Banks Index.

ROE Improvement

“Despite this announcement, we remain positive on the stock,” Natixis SA Paris-based analysts Alex Koagne and Steven Gould wrote in a note to investors Wednesday. While the analysts lowered their 2014 earnings-per-share by 2.8 percent because of the Brazilian charge, they rate the stock a buy with a target price of 46.70 euros.

Societe Generale is focusing on its main European and African retail-banking markets and since 2009 it has sought to allocate capital to businesses where it has “critical size,” it said in the statement. Last year Societe Generale sold its Asian private-banking business to DBS Group Holdings Ltd.

Closing its Brazilian consumer-finance businesses will add to Societe Generale’s return-on-equity as soon as this year without significant impact on the bank’s capital level, the bank said. Societe Generale, which will publish annual results on Feb. 12, last year set a goal to boost ROE, a key gauge of profitability, to more than 10 percent by 2016. After-tax ROE reached 6.8 percent in the third quarter, the bank said Nov. 6.

Societe Generale in Brazil will focus on serving corporate and institutional clients, according to the statement. Its main local units will remain Banco Societe Generale Brasil, Societe Generale Equipment Finance and ALD Automotive, with staff of about 300 people, a spokesman said.

Societe Generale had 19.7 billion reais ($7.3 billion) in assets in Brazil as of September, the 22nd-biggest bank in the nation, according to the most recent central-bank data.

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