As Happy And Wealthy As...A Frenchman?

Some enjoyably counterintuitive figures for you today.

The French, who are famous for being incredibly gloomy, for applauding soak-the-rich rhetoric and for grinding economic stagnation, are actually happy and pretty darn wealthy, as it turns out.

A new poll for Le Monde by BVA (ironically the same polling agency that ranked France as more pessimistic than Afghanistan and Iraq) found that 81% of French people were happy. Happy and rather self-satisfied, given that more than two-thirds said they were better off living in France than in US, Europe or the rest of the world. A majority also said that President Francois Hollande and his Socialist administration, which only a year ago seemed to embody popular French resistance to austerity and any change to the generous social safety net, needed to be more aggressive in pursuing reform.

Compare that with Credit Suisse's Wealth Report from October, which reported that France has more dollar millionaires than any other country in Europe. A country that culturally shies away from bling, that views bosses and businesses as barely one notch below demonic and that supports more taxes on the wealthy has more millionaires than the UK or Switzerland! Of course, once you hit the 50 or 100 million dollar mark, France finds itself overtaken by Germany and the UK. But the millions matter.

A lot of this won't come as much of a surprise to France-watchers, who know that French households have for decades been shunning debt and risk and accumulating wealth by stocking up on property (a whopping two-thirds of assets) and tax-friendly life-insurance funds. As a result the French are more prepared than most think to see changes to their social model. You tend not to want more austerity once you actually feel its effects; see how the Brits have turned on George Osborne's bitter economic medicine.

The question is what happens next to all this wealth. Can house prices avoid a serious correction? Will the French always be happy with low-leverage, low-return investments? Will the happiness itself continue? The hope in some corners must be that with minimal changes to the system and a cyclical pick-up in confidence, those wealthy French households will go back to spending again. But for the pessimists, that would only make the next crash much harder to overcome.

French banks battle economy with more cost cuts

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By Lionel Laurent and Christian Plumb

PARIS | Tue May 7, 2013 5:16am EDT

(Reuters) - French banks Societe Generale (SOGN.PA) and Credit Agricole (CAGR.PA) vowed on Tuesday to keep cutting costs after asset sales and lending cutbacks helped to offset a weak domestic economy in the first quarter.

Banks across Europe are moving to slash spending and cut jobs in the face of tougher rules about capital levels and the uneven post-crisis economic recovery.

SocGen, France's No. 2 listed bank, said it would cut 900 million euros ($1.18 billion) in costs over the next three years in order to reach a new return-on-equity (ROE) target of 10 percent, an increase of 2.6 points.

Smaller listed rival Credit Agricole, which is more exposed to the French economy via its parent network of regional retail banks, reiterated its bid to cut 650 million euros by 2016.

While both banks suffered from shrinking group revenues, rising French loan losses and market jitters over Cyprus and Italy in the quarter, they also cut overall expenses and booked gains from selling business units in a bid to shore up solvency.

SocGen shares rose more than 4 percent. Credit Agricole gained more than 1 percent in early trade before flattening out, while the STOXX Europe 600 index .SX7P rose 1.2 percent.

"What is impressive is SocGen's capacity to cut its cost base," said Yohan Salleron, fund manager at Mandarine Gestion. "The target they announced is pretty significant."

SocGen is in talks with unions to cut 620 staff at its central back-office operations, Chief Financial Officer Philippe Heim told journalists. Reuters exclusively reported last month that the bank was considering between 600 and 700 job cuts.

Larger domestic rival BNP Paribas (BNPP.PA), Germany's Deutsche Bank (DBKGn.DE) and Switzerland's UBS (UBSN.VX) have also announced cost-saving plans to help fight the rising cost of doing business and the worsening economic outlook.

BNP leads the pack in terms of balance-sheet strength with a core Tier 1 capital ratio of 10 percent under tougher Basel III rules at end-March. Deutsche Bank has raised capital to reach 9.5 percent. SocGen expects to be at 9.5 percent by end-2013.

Credit Agricole's fell to 8.5 percent from 9.2 percent as a result of interim regulation pending Basel III, which forces banks to count insurance exposure as equivalent to equity.

Odds stacked against SocGen in Russian roulette

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By Lionel Laurent and Matthias Blamont

PARIS | Fri Apr 26, 2013 7:07am EDT

(Reuters) - French bank Societe Generale's (SOGN.PA) estimated four billion-euro ($5.22 billion) bet on Russia must start paying off this year to stop investors urging the bank to cut its losses as the economic outlook darkens.

SocGen has for years held up its investment in Moscow-based Rosbank as a key source of future profits that will offset debt woes in Western Europe and rocky post-crisis financial markets.

Time has not been kind. SocGen has yet to deliver on the billions spent building up an 82 percent stake in Rosbank since 2006, integrating its back-office and technology platforms, shaking up management teams and cutting more than 2,500 jobs.

This year, Rosbank is expected to post a slight profit for SocGen's international retail arm after a 2 million-euro ($2.61 million) loss last year. It will be under pressure to show that this is the start of a sustainable and growing trend.

"This year they've really got to show they can provide some kind of profitability from the integration," said Espirito Santo banks analyst Andrew Lim, who believes Rosbank ideally needs to be making an annual profit of 120 million euros to prove it is on track.

"I have a net income forecast of only 50 million euros for 2013, so it is still not enough in my view," he said. "If they don't prove it this year, the natural conclusion would be to either close or sell these operations."

Deutsche Bank estimates Rosbank will make 8 million euros profit in 2013 while JPMorgan analyst Delphine Lee forecasts 18 million euros. While there is clear potential in Russia, this will be the "make or break year", she wrote in a note.

SocGen books the bulk of Rosbank's income at its international retail division. However, some Russian business including consumer-loan arm Rusfinance is booked at other divisions and is not covered by analysts' Rosbank forecasts.

Rosbank, which has a near five percent retail market share, faces a tough 2013. Russia'seconomy is weakening, loan growth is slowing and the fragmented banking market - heavily dominated by state-owned Sberbank (SBER.MM) and VTB (VTBR.MM) - has already seen a slew of foreign banks leave.

Russia recently slashed its economic growth estimate for this year by a third, to 2.4 percent.

This may make it harder for Rosbank to hit its 2015 targets, such as 25 percent growth in retail loans and 15 percent growth in corporate loans. Last year, the bank's retail loans grew 11.9 percent while corporate loans stayed flat.

Some investors see a sale as the best way out.

"There needs to be a (Rosbank) sale as soon as possible," said Frederic Rozier, fund manager at Meeschaert in Paris, which owned 0.01 percent of SocGen's outstanding share capital at end January according to Thomson Reuters data.

"These kinds of markets can deteriorate really quickly. It is not in SocGen's interest to wait if a good offer appears."

A sale of Rosbank would bring in 2.2 billion euros for SocGen, or one times book value, according to research by JPMorgan, which has estimated that SocGen has spent four billion euros building up its stake in Rosbank.

CULTURE CLASH

SocGen declined to comment for this story but has always publicly praised its Russian subsidiary's potential, seen as a key plank of Chief Executive Frederic Oudea's strategy.

"Growth in Russia is our ambition, without forgetting the fact that we still have a lot more work to do," Deputy Chief Executive Bernado Sanchez Incera said in February.

The latest big company warning French staff of cost cuts? IBM

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PARIS | Thu Apr 18, 2013 1:35pm EDT

(Reuters) - Technology company IBM is mulling up to 1,400 job cuts in France over the next two years, three trade-union representatives told Reuters on Thursday.

IBM, a bellwether for the IT industry, is in the midst of a drive to boost profits by 2015 against an uncertain global economic backdrop.

Local management has yet to officially outline whether there will be a formal job-cuts plan approved by U.S. headquarters, the union representatives said, but said the numbers had already been communicated.

"Management is set to present a plan to cut between 1,200 and 1,400 staff over the next two years," said Pierry Poquet, secretary general of the UNSA union, who said a meeting was planned for April 25.

"For now it is only a target...we've heard such announcements before but they don't always come to pass."

The CFE-CGC union's representative, Evelyne Heurtaux, confirmed the figures. "We've been told a figure of around 1,300 jobs cut over two years," she said.

IBM currently employs around 8,000 people in France, Heurtaux said.

An IBM spokeswoman could not be reached for comment.

(Reporting by Lionel Laurent and Gilles Guillaume; Editing by Elaine Hardcastle)

BNP Paribas criticised over Africa client controls, internal report says

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By Lionel Laurent

PARIS, April 17 (Reuters) - French bank BNP Paribas exercised poor controls over "high-risk" African clients and potentially illicit activity at its private bank in Monaco, according to an internal report seen by Reuters.

News of the confidential report, handed to top managers in October, 201l, comes as regulators across the world crack down on money laundering and tax evasion.

BNP, France's biggest bank by market value, has since closed the "few dozen" accounts involved and toughened risk controls to avoid "irregularities" in the future, a spokeswoman said.

Paris-based advocacy group Sherpa, which separately obtained the report, called on prosecutors to open an inquiry into its findings. BNP's spokeswoman declined to comment further.

The report alleges that "many" Madagascar residents seek to escape foreign-exchange regulations by accepting or exchanging euro-denominated cheques in lieu of local currency, building up an illicit money chain of cheques that passes back through Europe.

The inquiry analysed the activity of dozens of Madagascar accounts at BNP's private bank in Monaco between January 2008 and July 2011 and found high cheque volumes.

One account, belonging to a freelance salesman for the bank, received approximately 10 million euros ($13.1 million) via hundreds of cheques and passed the money to other accounts at BNP or to other banks in countries such as Switzerland, Belgium and China.

"It appears that the bank is not entirely in control of the back-end of financial transactions that may be in breach of regulations in the clients' country of residence," according to the report, which was passed to managers including Deputy Chief Operating Officer Jacques d'Estais.

"The way these accounts are used does not correspond to the activity of a private bank and generates high risks for the bank because of the weakness of the compliance framework that governs their oversight."

The account was frozen in June 2011 and BNP instructed the salesman that it would no longer accept any cheques, the report said.

French bank rediscovers the internet

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By Lionel Laurent and Alexandre Boksenbaum-Granier

PARIS, April 10 (Reuters) - French bank BNP Paribas is set to open a new online bank targeting 500,000 customers in five years as it revamps itsretail activities, two union sources told Reuters on Wednesday.

BNP and its rival Societe Generale are cutting costs in their branch networks, where a stagnant economy and consumer belt-tightening have hit revenues and raised the likelihood of branch closures.

Although France's biggest bank already offers online banking for its regular retail customers, the new project will be entirely digital, the sources said. French daily Les Echos, which reported the plan on Wednesday, said the new brand might be called "Hello Bank".

The project has a target of 25,000 customers by the end of 2013, one of the union sources said.

"25,000 clients by the end of this year and 500,000 in five years," he said, citing discussions held with BNP's management. "This is what we have been told."

A BNP spokeswoman declined to comment.

Exclusive: SocGen mulling up to 700 job cuts, sources say

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By Lionel Laurent and Matthias Blamont

PARIS | Fri Apr 5, 2013 1:04pm EDT

(Reuters) - French bank Societe Generale (SOGN.PA) may cut between 600 and 700 jobs as part of a broader cost-cutting drive in the face of stagnant growth in its home market, three union sources told Reuters on Friday.

SocGen management met with unions on Wednesday to discuss the proposals, which have not yet been finalized, the sources said.

The cuts, which will largely target back office staff in IT and compliance roles, will be partly offset by up to 100 new jobs created elsewhere, they added.

"There will be 600 to 700 job cuts at SocGen's central offices," one of the sources said. "Nothing is finalized but the proposals are fairly advanced."

SocGen employs 154,000 people worldwide, with 8,340 in its central administration department.

A SocGen spokeswoman said the bank would seek to avoid forced layoffs and that it was "premature" to discuss reorganization plans when they had not been finalized.

She added that SocGen would favor internal redeployment and voluntary departures where there was the need to cut staff.

CGT union representative Michel Marchet said management had presented "several" different projects and that final numbers would not be revealed until the end of 2013.

"There was a meeting, management presented a number of proposals," said Marchet.

SocGen pledged in February to cut costs over the next three years with a reshuffled management team and promised to put in place a revamped structure, without giving numbers or targets.