PARIS (Reuters) - French bank Societe Generale (SOGN.PA) is eyeing a 10 percent core capital ratio under tougher Basel III rules by end-2013, higher than its official target of 9.5, its deputy chief executive said on Tuesday.
SocGen, like banks across Europe, is cutting costs and selling securities to meet tougher post-crisis rules on bank risk and to soothe investors worried about balance-sheet robustness.
During a presentation to investors at a Barclays conference in New York, SocGen Deputy Chief Executive Severin Cabannes said that management had “done its job” during the eurozone crisis by selling assets and risk and putting the balance-sheet first. Its regulatory capital levels were still on the rise, he said.
“We should be around a 10 percent core Tier 1, Basel III, fully loaded ratio by the end of the year...Despite this environment, which has been very bumpy in Europe,” he said.
SocGen is finalizing a plan to cut headcount to boost profit and help meet a profit target of 10 percent return-on-equity by end-2015. Unions have said the bank is eyeing 420 back-office voluntary departures as part of the plan. Cabannes would only say an “optimization plan” was in its “delivery phase”.
SocGen is still in talks to buy rival Credit Agricole’s (CAGR.PA) stake in their jointly owned broker Newedge, he said.
During a question-and-answer session after the presentation, Cabannes responded to investor perceptions that SocGen was only “adequately” capitalized by emphasizing the weight of comparatively less risky retail banking in its business mix.
Responding to questions on SocGen’s corporate-and-investment-banking unit, which has cut risk and sold loans to adapt to tougher capital requirements, Cabannes said that investor concerns that it was a “persisting dilemma” were discounting the fact that it had potential to gain market share.
Cabannes also defended the French economy by saying that small-business default rates were stabilizing and that the Hollande administration was moving in the right direction with structural reforms, if not at the right speed.
“The question is more the speed of reform in France than the direction that has been taken,” said Cabannes. “If we don’t take structural reforms today, we are putting at risk the long-term growth potential of the economy.”
Reporting by Lionel Laurent