SocGen Chief Ousts Two Top Deputies After Worst Loss in a Decade

(Bloomberg) -- Societe Generale SA's Frederic Oudea ousted two of his top deputies as the embattled chief executive officer seeks more time to turn around the trading business following the lender's worst loss since the financial crisis.

Severin Cabannes, the deputy CEO in charge of investment banking, will leave his post at the end of this year, while Philippe Heim, who oversaw international retail banking, is stepping down immediately, the bank said Tuesday. Both were named to the roles only two years ago in a reshuffle that bought Oudea, one of the longest-serving bank executives in Europe, another four-year term following the exit of heir apparent Didier Valet.

The CEO, under pressure from the board, is overhauling the top ranks and cutting trading risk after the bank's worst quarter since rogue trader Jerome Kerviel's record loss more than 12 years ago. SocGen was forced to write down the value of its trading business following heavy losses on the complex structured products that it and its French peers are known for.

Natixis SA, which had similar losses in its trading business, on Monday replaced CEO Francois Riahi after just two years, citing differences over strategy. Both lenders indicated they would adjust the business with structured products, which became increasingly difficult to hedge when corporations began canceling dividend payments to shareholders as a result of the pandemic, Bloomberg has reported.

SocGen rose 3.4% at 11:25 a.m. in Paris trading. The stock has lost 57% this year, one of the worst performers among the large European banks.

Oudea had come under pressure before. The bank late last year initiated a formal search for a successor, Bloomberg has reported. The plan then was to have a candidate ready when the CEO's term ends in 2023, though the replacement could happen before that, people familiar with the matter said at the time.

The latest management changes do away with two of the four deputy CEOs appointed in 2018, after Valet, who was in charge of the investment bank and was seen as a potential CEO candidate, left to help to resolve U.S. legal issues. SocGen will now have only two deputy CEOs, while it created a new role of deputy general manager for a new generation of “high-potential leaders,” the bank said.

To read more about SocGen's previous reshuffle, click here.

Unlike Riahi at Natixis, who had a relatively short tenure, Oudea has been in charge for more than a decade. He spent part of the time in the dual role of CEO and chairman. In 2015, SocGen separated the two positions and named former European Central Bank board member Lorenzo Bini Smaghi to oversee the board. The decision to reorganize management again was proposed by Oudea and approved by the board, the bank said.

“These decisions taken by the board of directors aim at renewing the management team around Frederic Oudéa, drawing on in-house talents, in order to better support the in-depth changes needed to build the bank of tomorrow,” Bini Smaghi said in the statement.

SocGen on Monday posted a 1.26 billion-euro net loss for the second quarter, after 1.33 billion euros in one-off costs following a review of the global markets and investor services business. Equities trading, a traditional strength of the lender, declined 80% as structured products were hit for a second straight quarter by the cancellation of dividends during the pandemic. The bank vowed to stop producing the structured products that went awry and develop alternatives that will be less sensitive to market swings.

The losses at SocGen and Natixis were particularly painful after their biggest rival, BNP Paribas SA, rebounded from a trading hit with a standout performance in fixed-income. Revenue from trading fixed-income securities, currencies and commodities jumped 154% in the second quarter from a year earlier, offsetting a more than 53% decline in equities trading. It said there was only a “residual impact” from the dividend cancellations.

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