By Maya Nikolaeva and Julien Ponthus
PARIS (Reuters) - Societe Generale , France's second-biggest listed bank, said it would float a stake in its booming vehicle leasing unit ALD, as part of efforts to diversify further away from retail banking as low interest rates sap revenue at home.
It made the announcement as it reported that net income in the final three months of last year had fallen 40.5 percent to 390 million euros ($417 million). That was better than the average analysts' estimate of 354 million in a Reuters poll.
The bank is under pressure to cut costs as the French economic recovery remains fragile, stricter regulations hike the cost of doing business and the internet challenges the traditional model of banking.
Societe Generale has launched a plan, cutting overheads at its French retail arm where net interest income fell more than 5 percent over 2016.
It is investing to bolster online and banking on mobile phones while cutting back-office centres and closing 92 bank branches in 2016.
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It also reduced costs at its investment banking unit, which enjoyed a trading surge in the second half of the year but nevertheless ended with revenues down 2 percent over 2016.
SocGen said it had reduced front office headcount by 5 percent and increased the number of staff in low-cost centres such as Romania.
It has tried to refocus on operations generating more fees and consuming less capital but is struggling to hit its targets.
Fourth quarter revenues rose 1.3 percent to 6.13 billion euros, above the poll average of 5.99 billion.
Financial services to companies, that includes vehicle leasing, fleet management and equipment financing, has been one of SocGen's growth engines. Its revenue rose 23.4 percent in the fourth quarter to 454 million euros.
SocGen said it would float ALD Automotive, that had 1.4 million vehicles in its park. The unit helps companies finance the leasing of vehicles.
"Societe Generale considers ALD to be a high value-added activity," the bank said in a statement. "Its future growth, supported by the IPO, will continue to create value for the group."
The bank's return on equity - a measure of how well a bank uses shareholder money to generate profit - was 7.8 percent in 2016 versus 7 percent in 2015. That is below the 9 to 10 percent that analysts cite as needed.
Earlier this week, larger rival BNP Paribas also revealed that its retail business in France had struggled.
($1 = 0.9364 euros)
(Editing by John O'Donnell)