Societe Generale Plans €900M Cost Savings as Profit Halves on Own-Debt Charges

French bank Societe Generale's net profit halved in the first quarter due primarily to accounting charges related to the bank's debt.

Group net income declined 50% to €364m ($476m, £307m) as income from banking operations declined by 19% to €5.09bn.

The second-biggest bank in France also booked €1.05bn charge related to the revaluation of its own debt.

Following the weak results, the bank plans to cut its annual costs by €900m by the end of 2015, which would raise SocGen's return on equity to 10% from 7.4% in the first quarter.

The move would cost €600m for the bank and is expected involve further job cuts, after 1,600 layoffs last year.

The bank has undertaken a cost-cutting initiative over a year ago to simplify its operations. So far, it could save €550m in costs as part of the plan.

The bank's core tier 1 ratio, a measure of top-quality capital such as equity and retained earnings, stood at 8.7% at the end of the first quarter. SocGen forecast that the ratio would reach close to 9.5% by year end.

Net income at SocGen's corporate and investment banking division rose 41% to €494m, while the same dropped 22% to €256m at the consumer-banking business. Profit at its international branch networks, including Russia, Romania and the Czech Republic, increased 76% to €79m.

In line with the recession in the eurozone and new rules to reduce banks' risky assets, SocGen has sold its subsidiaries in Greece and Egypt. The lender booked a €377m gain in the first quarter from the sale of the Egyptian business.

Among SocGen's rivals, BNP Paribas, France's largest listed bank by assets, earlier recorded a 45% decline in first-quarter net profit to €1.58bn on lower revenue and higher bad loan provisions. Credit Agricole, however, reported a 51% jump in first-quarter net profit to €469m.