For the head of Societe Generale Private Banking, Jean-Francois Mazaud, positioning the private bank at the heart of Societe Generale Group has been the key to growth. This strategy has led to SGPB finding successful synergies within the group, enabling it to retain its traditional, customer-centric niche alongside embracing a digital transformation. Meghna Mukerjee finds out more in an exclusive interview
Societe Generale (SocGen) Group celebrated its 150th anniversary in 2014. This French banking giant has been traditional yet innovative in its private banking operations, keeping on top of industry changes and raising its game.
At the helm of the private bank is CEO Jean-Francois Mazaud, who came into his current role in 2012. His sharp, vibrant and engaging persona comes through in the way he has strategised for the growth of Societe Generale Private Banking (SGPB). Mazaud thinks outside the box and is not afraid of doing things differently to the competition.
Positioning the private bank at the heart of the SocGen Group has been the core of his business strategy.
The strategy leverages on all of the Group’s strengths – interconnecting the private bank to its retail networks as well as making more of its link with the Corporate and Investment Bank (CIB). By doing so, there "is tremendous potential of value creation via synergies", believes Mazaud.
He explains: "In France, we decided to enter into a new project with the retail bank whereby we would host customers who had a minimum of EUR500,000 in their account with us. We divided our initial wealth threshold by two, but we still hold twice the threshold that some of our closest competitors have.
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"The net result has been that in 2014, after two years of preparation, we launched a new private banking model in France and reported EUR50bn of assets under management (AuM) at the end of 2014, growing from EUR20bn of AuM in 2013."
The growth has indeed been exponential for SGPB in France. From 3,000 households in 2013, the private bank moved to 40,000 households in 2014. Additionally, going from a presence in 8 big cities in France in 2013, SGPB has increased its presence to 80 cities, leading to a complete change of scale in the country.
"Our promise to customers is to retain the high level of service, expertise, and our custom-made approach. That required us to train 165 bankers who joined the private bank from the retail network in one go last year, and adapt our tools and products to the new customer base that we want to service, as well as give them a smooth entry into the private bank," says Mazaud.
At a time when other banks are reducing their branch numbers, SGPB has decided to "occupy the field" with a link to approximately 2,300 branches across France. Mazaud believes that despite customers’ changing preferences towards digitalisation of services, there is a strong need for physical proximity.
"The physical link is extremely important, not only with existing clients but also to gain new customers. SocGen is the bank for entrepreneurs and we need to be present in the countryside – to be close to these customers where they want to sell and transfer money to the next generation.
"It’s not true that wealth is only represented in Paris. There is entrepreneurship and value creation in the countryside as well," he adds.
The success of the partnership with its retail network in France led the way for SGPB to roll out the same model other in countries where SocGen has a retail customer base. Two similar projects were completed in Morocco and Croatia over the last two years.
"Obviously the wealth segmentation is not the same as what we have in France. Typically, we start the segmentation with EUR200,000," Mazaud informs.
In Morocco, SGPB has launched branches in cities such as Casablanca, Marrakesh to name a few. In Croatia, SGPB has already started offering structured products that have been greeted with "great success".
"We must also remember that the bankers coming in are from the retail network and are being trained to private banking. The build up has to happen at a pace that is reasonable, to cope with the deployment of the products and services.
"We have other projects underway to complement SocGen’s existing retail networks in other countries," says Mazaud.
Links with CIB
Having previously been the deputy head of global finance at SocGen’s CIB for four years, the increased collaboration with CIB is important to Mazaud as an axis for SGPB’s re-honed strategy.
Though the private bank has always called on specific parts of the investment bank – including its structured products business – for product, Mazaud’s aim has been to see increased introductions to primary market issues, IPOs, rights issues and bond issues, alongside links with M&A, private equity and financing.
Mazaud informs: "About three years ago – when it came to primary bonds – we did almost nothing. In 2013, there was a bit more than EUR2bn of demand for primary bonds, but in 2014 the demand was more than EUR3bn. We saw a steep increase in the demand for primary bonds, and the progress made in primary equity, real estate and private equity go in the right direction."
On the back office and IT side as well, SGPB has decided to pool services with CIB, in order to benefit from its "innovation and good practices". "We are also benefitting from bargaining and innovation power.
"SGPB has an independent strategy, which is different to the buy side research of CIB. We can formulate a different fundamental view of markets and, as a consequence, recommend a different asset allocation. As far as products and solutions are concerned, we operate an open architecture model, where our aim is always to find the best of breed to serve our customers. This can lead to recommending solutions which are not "home-made", even for structured products," he adds.
Further to the back office enhancements, SGPB has three pillars to put its all-round IT rejuvenation plan to action.
The first one is the transformation of its digital or customer interface, whereby SGPB links all its products and services to the customers through a series of applications (apps). The second IT-plan pillar is about data storage around the customer information they have. The third pillar is around data analytics.
SGPB’s digital transformation journey entails the deployment of a sophisticated e-banking platform for wealthy clients so that they have the full spectrum of options to transact – "bonds, shares, forex, money market, whatever the asset class".
SocGen in France already has a mature e-banking app, which is famous with customers with over 35m app downloads and counting.
Beyond France, SGPB Hambros in the UK launched its new e-banking platform this month. Through an improved Client Relationship Management (CRM) tool and enhanced portfolio management system, the new e-banking platform provides clients with better navigation capabilities and flexibility in accessing information such as portfolio valuations, positions and performances.
SGPB in other countries is looking to launch new e-banking platforms as well over the course of 2015 and 2016. The aim is to complete the digital transformation project in 2017 for all of SGPB’s locations.
"What is interesting is that we devised this project from scratch. You can navigate from a tablet to a computer to a mobile phone smoothly. The client experience will be similar from one device to another. We have been working with our partners to do that from the start.
"This is a significant advantage vis-a-vis competitors as some built their solutions for the PC only and when they wanted to expand it to the tablet or mobile phone, it created difficulties in the implementation phase because the ability to navigate smoothly was not defined from inception."
The security attached to all the systems is of utmost importance, says Mazaud, and SGPB has spent time defining strict security rules.
"Our digital transformation is a long journey and it will take a few years to be fully implemented but it is exciting and creating positive energy within the team," adds Mazaud.
In terms of geographical growth strategy outside France, the priority has been to focus on SGPB’s core markets, namely UK, Belgium, Luxembourg, Monaco, Switzerland and Dubai.
Like many other global private banks, SGPB has continued to sell-off or consolidate its businesses in certain countries to gain a stronger foothold or retreated from markets of least strength. "We had to make choices about the markets where we want to be," explains Mazaud.
In October 2014, South East Asia’s largest bank by assets, DBS, successfully completed the acquisition of SocGen’s Asian private banking unit, comprising its Singapore and Hong Kong businesses, in a $220m deal.
Mazaud is confident in this partnership.
"In Asia, the nature of the market was such that we either needed to invest and double our size to be relevant to our customers or exit the market. We decided to go for the latter, while partnering with DBS and we are very satisfied with the outcome. DBS too has significantly upgraded its private banking position in the market through this deal. DBS is a regional leader, they have strong links with the corporates, they have a universal banking model, and are very similar to SGPB in EMEA."
Within the framework of its partnership with DBS, SGPB has also set up an arrangement whereby if customers from Europe want to move to Asia, they can choose DBS as a port of entry and conversely DBS can do the same with its customers who are moving to Europe.
With increased costs of compliance and doing business, Mazaud reiterates the importance of choosing the markets in which a private bank wants to operate.
"We are better off being strong and impactful with our customers in a smaller number of countries where we make the difference. We will see this trend increasing in the years to come and that may entail external growth in our target markets, if and when we believe it makes sense for us," he says.
Staying on top of change
Like other banks, keeping up with the changing regulatory environment is key for SGPB.
"One important point of focus at present is the preparation for the automatic exchange of information, as decided by OECD countries in 2014 and to be implemented in 2017.
"We want our customers to understand that SGPB is strongly committed to tax transparency. We have been expressing that through the general terms and conditions of our branch networks, which have been adapted to express the level of disclosure we require. We have also been pro-active in correspondence with our customers to promote this level of conduct," says Mazaud.
Structuring policies for bankers and setting the do’s and dont’s is equally important for SGPB. "We have to be permanently vigilant," he adds.
According to Mazaud, the aim going forward is to continue maximising the synergies within SocGen group and be the relationship bank of preference for customers, alongside being a reference player in the markets it has chosen. The target is also to be in a position to "progress through the cycles and absorb the shocks".
When Mazaud joined the private bank, his first objective was to discover the people, and the readiness of the SGPB teams to embrace change "surprised" him positively, as he had viewed the private banking world to be a ‘conservative’ one from the outside.
"The willingness of our people to change has been across generations and it comes from the conviction that if the strategy is right the change will be good for the bank and our clients. For me this demonstrates strength in the business and I’m satisfied by that," says Mazaud.