PARIS French bank Societe Generale (SOGN.PA) is forecasting a "significant" drop in 2012 investment-bank revenue compared with 2011, weighed by higher funding costs and efforts to slash its balance sheet, according to an internal memo obtained by Reuters on Monday.
France's second-biggest listed bank has also decided to exit or strongly reduce property, shipping and aircraft financing activities, as well as physical energy trading in North America, according to the 245-page memo sent to employee representatives.
"(SocGen) CIB expects a significant drop in revenues for 2012 compared with 2011, weighed by higher charges linked to funding and balance-sheet reduction," the memo said.
A spokeswoman for SocGen declined to comment.
Like many of its peers across the European bank sector, SocGen is cutting jobs and scaling back lending in the face of a festering eurozone debt crisis that has frozen funding markets and which cut its share price by more than half in 2011.
SocGen Chief Executive Frederic Oudea, who rose to the top spot after a 2008 rogue trading scandal almost brought the bank to its knees, has reshuffled management and brought in a new chief financial officer formerly at rival Credit Agricole (CAGR.PA) to tackle the grisly market environment.
The new team's investment-banking strategy will focus on core markets like Europe and activities such as commodities financing and equity derivatives, where SocGen has a long-standing competitive edge, according to the memo.
There will be "selective" investments in emerging markets like Brazil, China, Turkey and India, the memo said.
But overall lending and costs will come down to help preserve capital in an environment where funds are rare. The bank is to cut discretionary spending by 5 percent in 2012 and will sell "toxic" assets left over from the last financial crisis to free up 1.3 billion euros ($1.7 billion) through 2013.
(Reporting by Lionel Laurent and Matthieu Protard)