March 22, 2017 / 4:38 PM / 4 months ago

UPDATE 1-SocGen says to raise spending on French retail bank

2 Min Read

(Adds quote on not affecting dividend policy, date of strategy presentation in November)

PARIS, March 22 (Reuters) - Societe Generale plans to spend an extra 250 million euros ($270 million) this year on its French retail banking business, its deputy CEO said, as it fortifies itself against increasing competition from online rivals.

The bank has cut overheads at its French retail arm where net interest income fell more than 5 percent in 2016. It is investing to bolster online and mobile banking while cutting back-office centres. It closed 92 bank branches last year.

"Given the good performance of other businesses, we have decided to accelerate, to have 250 million euros of additional capital expenditure ... without changing our dividend guidance," Severin Cabannes told a conference, according to a webcast on the bank's website.

Last month SocGen said it planned to keep increasing the dividend and maintain the current 50 percent pay-out ratio.

Deputy Chief Executive Severin Cabannes also reiterated that SocGen's French retail banking revenues would weaken in 2017 at the same pace as in 2016, indicating a decline of up to 3.5 percent.

Rock-bottom interest rates have hurt European banks, but the U.S. Federal Reserve's decision on March 15 to raise interest rates has increased the likelihood of higher European lending rates in the not too distant future.

ECB President Mario Draghi reaffirmed on Thursday that the euro zone's central bank would first stop adding to its 2.3 trillion euro bond-buying programme and only afterwards consider any increase in its interest rates. But investors are already assessing how much European banks could make in a higher rate environment.

Cabannes estimated that a 1 percentage point rise in the European yield curve could have a positive impact of 1 billion euros on SocGen's earnings over three years.

Cabannes also added that the bank would present a new strategic plan on Nov. 28. ($1 = 0.9259 euros) (Reporting by Maya Nikolaeva; Editing by Louise Heavens, Greg Mahlich)

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