BrazilSocGen taps consulting firms for strategic programmes
French bank Société Générale (SocGen) has tapped Bain & Company and McKinsey & Company to support the firm’s leaders with two major strategic transformation programmes.
After issuing less than expected financial results and a profit warning for the rest of year, chief executive officer Frederic Oudea has put a number of initiatives in place to shore up Société Générale’s finances. One initiative focuses on downsizing the bank’s headcount, and in April this year Oudea announced that some 1,600 jobs would be slashed, mainly in the corporate and investment banking arms. The two units employ approximately 18,000 bankers and staff in 30 countries, with around 750 of the job cuts set to take place in home country France.
The mid-term plan is to save €500 million in costs in the two divisions in order to salvage profitability, said Severin Cabannes, Société Générale’s deputy chief executive officer in a statement. “We have carried out a review of all the activities of corporate and investment banking. Our goal is to restore the business’ profitability above the cost of capital.”
Downsizing in Paris: Bain
Now, a second downsizing project has been announced, aimed at cutting personnel costs by 20% in the banking group's Paris headquarters. The cost cutting exercise is focused on back office functions (finance, IT and human resources) operating from the firm’s head office in the centre of Paris (Boulevard Haussmann) and from its administrative headquarters in the city’s business district (La Défense).
These functions are deemed to be able to operate more efficiently, and moreover, as the bank has trimmed its retail banking operations in Eastern Europe, fewer people are required to oversee the region.
This project will, according to reporting from Bloomberg, lead to hundreds of additional job cuts in Paris. Consultants from Bain & Company have been tapped to support this engagement. The advisors are currently assessing the efficiency and effectiveness of the back office functions, including benchmarking them to those at some of Europe’s most efficiently run banks, and are projected to deliver their findings in the coming months. The consultants are also working on the new organisation structure, transition roadmaps, and redundancy plans.
Capital beefing: McKinsey
Meanwhile, as part of another strategic programme, known internally as ‘Optica’, consultants from McKinsey & Company are helping Société Générale’s management with beefing up the bank’s capital position. Higher capital requirements from central banks and increased regulation is forcing banks across Europe to improve their tier 1 and tier 2 capital positions, and in recent ‘stress tests’ from the European Central Bank, Société Générale turned out France’s weakest big bank on criteria such as solvency.
Chief executive Oudea has set the target of freeing up €10 billion in capital, on the back of a string of measures. Accelerating the disposal of assets is one such measure. After selling its Belgian private banking unit to Dutch institution ABN Amro last year, the company is currently weighing exits from its Lyxor asset management business (which oversees about €151 billion of assets), its UK private banking business, and Nordic equipment-leasing operation. The bank is further reviewing the internal organisation as it seeks ways to improve its financial and regulatory processes.
Earlier this year, another French multinational – Air France – also hired McKinsey for a strategic review.
