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ORIGINAL FRENCH ARTICLE: Les banques se gavent sur les marchés

by Clotilde Mathieu

Banks Stuffing Themselves on the Markets

Translated Thursday 15 August 2013, by Gene Zbikowski

With bottom lines that have doubled and sextupled in the second quarter, French banks are accentuating their dependency on the markets, cutting jobs rather than financing the economy.

Raking in profits while stimulating the economic crisis, fueling the financial bubble and laying off staff. That, in sum and upon reading their bottom lines for the second quarter, is the strategy that French banks appear to have adopted in order to please their shareholders. A doubling for Société générale and a sextupling for Crédit agricole SA, between April and June, leave no doubt: with respectively 955 million euros and 696 million euros in profits, the takings are “higher than expected.” Share prices have been soaring and this despite the still chaotic economic environment. With records set thanks to investment and finance banks (IFB), in other words, the ones that act on the financial markets, financialization is again moving ahead.

For Crédit agricole, which released its figures yesterday, the contribution of the corporation’s IFB was 254 million euros (up 38%). Last week, Société générale also chalked up a solid “performance” on the part of its market activities in the second quarter, almost tripling, to 374 million euros, its net result on a turnover that rose by nearly 40% to 1.69 billion euros. Only BNP Paribas noted a fall of nearly 40% for its IFB division, but it foresees upping asset management by 10% in the course of the next three years. However there’s no reason to panic about the fall, the world’s biggest bank does show, all the same, 1.76 billion euros in profits for the quarter.

The downsizing initiated last year cleared the way to these super-profits. According to a study on employment done by the French Association of Banks, the bosses’ organization in the banking sector, 2012 marked a turning point: the number of people working in the banking sector in France fell by 1.6%, something that had not happened in the past 13 years. But the downsizing is continuing. In September, the French investment bank Natixis is expected to announce the axing of 500 to 700 jobs through voluntary departures.

While this destruction of jobs has mainly been realized in the IFB divisions, with staff cuts of 5%, 10% of which is in front office activities (a 20% cut among the traders, for example), the banks are now proceeding to the next stage. By developing on-line banks, the corporations no longer conceal their desire to eliminate receptionist jobs, and even branch offices. Thus, a December 2012 study by Roland Berger Strategy Consultants estimates that each year, 2% to 4% of the branch offices could close. Retail banking accounts for 70% of the jobs in banking.

Société générale pushed through its plan to save 550 million to 1,450 million euros in February. For its part, the management of Crédit agricole announced that it had reduced its worldwide staff by 9.5% between the second quarter of 2012 and the second quarter of this year, which amounts to about 8,000 jobs. In terms of the next level up, the regional head offices, after cutting 279 jobs in 2012, the corporation plans to eliminate another 1,400 in 2013, according to information that appeared in the press early this year. Disappointed by the performance of its retail banking division in France, BNP has not shrunk from cutting jobs in France while recruiting 500 staff in Germany, where the economic situation appears better. In the final analysis, the banking law voted in mid-July, instead of attacking the enemy, seems to have stimulated it.

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500,000 euros. That is the amount of the fine imposed by the French securities regulator, Autorité des Marchés Financiers, on Société générale for “shortcomings in the adoption” of an auditing procedure for its fund management activity and for not having provided itself with “computer means adequate to its activity.” This fine come on top of another, amounting to 280,000 euros, imposed by the AMF last July, rebuking the bank for “not have served the interest of shareholders as much as possible” and failing to evaluated “complex financial products precisely and independently” that were sold by the mutual trust Sgam Invest Prudence PEA.

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