Société Générale: branch line
Customers and unionists will need careful management in the shift to remote banking
In France, they prefer the personal touch, and that extends to banking. But if Société Générale has its way, France will lose its leadership in bank branches per person in Europe. The bank on Monday offered details of its plans to cut 600 outlets by merging two domestic retail divisions.
SocGen is only following the pack. A slew of European banks including ABN Amro, Deutsche Bank, HSBC and Svenska Handelsbanken have announced branch closures. It is a natural response as business moves online and low rates squeeze lending margins.
But France’s powerful trade unions will look through digital hype to likely job cuts. They are the reason bank branches per capita have dropped just 18 per cent in the decade to 2019, according to the IMF. Compare that with a slimming by one-third throughout the EU.
These sensitivities, as much as SocGen’s blasé attitude to underperformance, explain the leisurely timetable. The integration should slash overheads by €350m annually in 2024, about 6 per cent of group operating profit last year. SocGen will bring together its French network with that of subsidiary Crédit du Nord.
Ironically, retail banking has provided much of group profits recently, as the investment bank has stumbled. Earnings from global banking and investor solutions almost halved in the three years to 2019. So customers and unionists will need careful management in the switch to remote banking.
SocGen’s online bank, Boursorama, has grown quickly, more than doubling customers to over 2m since 2016. But even in this pandemic year the French have not exactly embraced internet banking, says McKinsey. Its recent survey revealed that online or mobile banking usage trod water this year. Spain, Germany and Portugal all experienced double-digit percentage increases.
The market has warmed to SocGen of late. The stock has bounced higher than rival BNP Paribas over three months, while still trading at a steeper price discount to book value. Even this modest improvement will not last if all the group’s cost cuts come as slowly as its branch closures.