It's happened again. In the space of less than one week, another third-tier bank has announced a program of mass redundancies. SocGen's new strategy may, however, be a little less aggressively implemented (at least to begin with) than Nomura's last Thursday.
Both banks are cutting entire businesses. Nomura said it wants to 'downscale' G10 FX, emerging markets and flow credit in Europe and the Americas, and the Japanese bank's employees had tales last week of whole trading desks being shown the door. SocGen says today that it wants to close both its over the counter (OTC) commodities trading business and its prop trading subsidiary, and to euphemistically 'refocus' its flow trading activities, particularly in rates, credit, currencies and prime services.
Combined with cuts in central functions and the merging of financing and advisory units, SocGen's new approach is expected to lead to 1,600 job losses. However, while Nomura's new strategy led to tears in the foyer on Friday and talk of a "bloodbath" as its traders were told to leave the building with boxes containing their belongings, SocGen staff say things seem pretty chill there for now.
"I haven't seen anyone here being escorted out," says one London fixed income professional. "This has been flagged for months and people were expecting it - we knew that entire business lines would close this time."
It likely helps too that SocGen has rolled out its (very) generous voluntary redundancy program yet again, under which employees who go quietly can collect up to $340k in severance pay. While it's not clear whether this will be on offer to employees in the French bank's entirely shuttered businesses, it may be used to ease the pain elsewhere.
Although the hysteria may be minimal at SocGen, events both there and at Nomura should elicit a sense of panic at other banks in similar situations. As Oliver Wyman and Morgan Stanley noted in their recent annual review of the banking industry, second and third tier flow trading businesses are bad places to be. - If you work in flow trading right now, you need to be at a top bank with a huge tech budget and a large liquidity pool. Otherwise, you need to look hard at what's happening at SocGen and Nomura - and to brace yourself emotionally for what's coming next.
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