French banks seen cutting thousands more jobs

Tue May 15, 2012 5:48am EDT

* Banks face weak markets and economy, regulatory clampdown

* Lag many rivals in cuts. May have been waiting for election

* Hollande pledges to fight layoffs but banks a question mark

* Retail as well as investment bank jobs seen at risk

By Christian Plumb

PARIS, May 15 (Reuters) - France's biggest banks are likely to cut thousands more jobs, catching up with European rivals as they grapple with a slowing economy, weak capital markets and a looming regulatory clampdown by new Socialist president Francois Hollande.

Societe Generale, BNP Paribas and Credit Agricole announced a first wave of layoffs, mainly in investment bank and consumer credit businesses, late last year.

But their cutting has been tentative compared with European peers like UniCredit and ING, and with little sign of improvement in business conditions, analysts think a next round of firings could be deeper and broader, extending into area like retail banking.

Recruitment consultants say the banks had been holding back until after last week's presidential election for fear of hurting the campaign of pro-business incumbent Nicolas Sarkozy.

The victory of Hollande, who has declared "the world of finance" his main adversary, could remove the brakes and may even exacerbate the cutting, depending on the final shape of a regulatory clampdown he is planning for the industry.

"They've been waiting until the election ... because they didn't want to alienate their friends in the UMP," said Stephane Rambosson, managing partner at executive search firm Veni Partners, referring to banks' relations with Sarkozy's party. "Most of these guys are pretty close to Sarkozy and they didn't want to have any negative effect on his election campaign."

The banks are unlikely to be the only French firms to fire large numbers of workers in the months ahead. Air France-KLM has said it needs to make deep cuts in labour costs, while retailer Carrefour could fire 3,000 to 5,000 French staff, unions have said.

An auto industry plagued by overcapacity and a telecoms sector stung by competition from low-cost operator Free Mobile may also make cutbacks.

A senior adviser to Hollande late last week said the new government would do all in its power to prevent mass firings.

Michel Sapin, seen as the front runner to become Hollande's finance minister, said the goal would be to make it "extremely expensive" for firms to shed workers to boost their share price.

But Sapin referred specifically to General Motors, which said last week it may close a factory in eastern France, and it is unclear whether Hollande would campaign as vigorously against banking layoffs given his criticism of the sector.

In the election campaign, Hollande pledged to curb banks' "risky" trading activities and raise taxes on the industry.

The Hollande transition team did not respond to requests for comment.


BNP Paribas CEO Jean-Laurent Bonnafe told Reuters last week that France's largest bank, which has already announced plans to lay off 1,400 employees, did not plan further job cuts.

But many view a second round of layoffs, even if not immediately after the election, as likely given the slowing French economy and ongoing weakness in capital markets.

Data on Tuesday showed France's economy stalled in the first-quarter.

Mergers and acquisitions involving French firms, meanwhile, were down 83 percent in the quarter with boutique bank Lazard and foreign banks leading the rankings. Debt capital markets were down 15 percent as well, though equity offerings were a bright spot, up 44 percent, according to Thomson Reuters data.

"At this stage they don't really know where they're going so that's why the first layoff round was probably insufficient," said Christophe Nijdam, an analyst with Paris-based research firm Alphavalue.

"It will probably take a full year for the French banks to get their act together again regarding their business model."

Further layoffs would follow a broader industry trend.

Jobs in London's finance sector are expected to slump to their lowest level in 16 years, with the euro zone crisis predicted to cause over 25,000 layoffs in 2012, the Centre for Economics and Business Research said last week.

BNP's layoff plan targets just over 1 percent of its total workforce, even including a few hundred cuts in asset management and consumer credit. BNP's smaller rival Societe Generale is cutting roughly 1,600 jobs worldwide, just under 1 percent.

Those reductions pale beside those by rivals like UniCredit, which is cutting 6,150 jobs, or 3.8 percent of its workforce, or ING, which is laying off 2,700 people, or 2.7 percent.


While most French banks' attention has been on their corporate and investment banks because of their heavy dependency on dollar funding, which virtually evaporated last summer, other areas could also be in the firing line in the months to come.

"There was a first wave of cuts which hit their activities in France and abroad, but it won't be enough," said a Paris-based consultant who works with French banks.

"We see something in the order of cost cuts of 7 to 10 percent, or 1 to 1.5 billion euros per bank, a cost cutting plan that would impact everyone, all the areas and all job functions."

A slowdown in France's previously robust housing market could lead to retail as well as investment banking cutbacks since a mortgage slowdown could hit branch traffic as well as cross-selling of products like insurance and investments.

Such reductions are more likely to happen by slowing what had been brisk hiring and not replacing outgoing employees rather than actually firing people, the consultant said.

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