Societe Generale to shut commodities desk as part of shakeup

10 Apr 2019 | Tom Houghton

French investment bank Societe Generale is to close its over-the-counter (OTC) derivatives trading business as part of a strategic shift to limit losses, with the bank trimming almost all its exposure to the commodities market as a result.

Socgen underperformed in 2018, as revenues at its Fixed Income, Currencies and Commodities division were down 16.8% year-on-year in the last quarter of 2018 at €1.98 billion, while a €37 million loss was attributed to commodities at its derivative trading unit in 2018.

After the move, Socgen’s only trading exposure to commodities markets will be from the management of listed or index instruments, a press release from the company said.

Some 1,600 staff are to lose their jobs as part of a wider shakeup of the bank as it refocuses on rates, credit, currencies and prime services and aims to cut some €500 million of annual costs.

Societe General was one of the last major investment banks to retain an active interest in over-the-counter derivatives in the commodities markets, with most others having pulled out in recent years as losses and regulatory hurdles mounted.

Commodities have been ranked among the poorest performing asset classes for much of the past decade, with the sector returning an average 11% loss in 2018 compared to a 2% gain for cash, according to a recent JP Morgan report.