Société Générale (SocGen), beset by a huge rogue trading
scandal, has been actively reassuring its private banking clients
over the bank’s stability. But its survival as an independent bank
has been thrown into doubt after it lost €4.9 billion ($7.2
billion) in its equity derivatives meltdown.
Merrill Lynch analysts have even gone as far as to suggest a
potential tie-up, saying HSBC, Europe’s largest bank, could build
revenue in emerging markets and investment banking by bidding for
SocGen. HSBC already owns a French bank, in the shape of the former
Crédit Commercial de France, which is not regarded as a strongly
performing part of its global network. HSBC may be seeking to exit
French retail banking altogether.
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However, BNP Paribas has indicated that it is considering a bid for
SocGen. Other possible suitors for all or part of SocGen could
include Crédit Agricole, UniCredit, Banco Santander and Banco
Bilbao Vizcaya Argentaria, other analysts suggest.
The French government has signalled that, in the event of a
takeover, it would prefer SocGen to be taken over by another French
bank, in order to defend the country’s economy and financial system
from a major incursion from abroad. But that may entail a major
cutback of bank staffing as two French banks sought merger
synergies and culled overlapping branches, in what analysts called
a potential “jobs bloodbath”.
“If there is a French solution it would result in more job losses
in France than if Société Générale were to be associated with a
foreign partner,” said Jean-Pierre Lambert, analyst at brokerage
Keefe, Bruyette & Woods.
In private banking, a BNP Paribas/SocGen alliance would form a
major new power. BNP had $185.7 billion of private client assets
under management at end-2006 compared with $100 billion for SocGen.
But SocGen’s assets under management (AuM) are understood to
exclude a significant proportion of high net worth individual
assets managed by its retail bank; however, those equivalent assets
are included in the BNP figures.
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By GlobalDataBut even on published data, a combined BNP-SocGen total would give
the enlarged group a notional ranking as the 11th-largest global
private player, well ahead of Deutsche Bank with its $248.9 billion
of AuM, based on data by UK wealth trackers PAM. The combined bank
would additionally rank as the fourth-largest private bank in
Europe.
SocGen, under its private banking chief Daniel Truchi, would also
give BNP or another partner a powerful wealth franchise across
Asia-Pacific, in addition to Europe.
For now, SocGen seems determined to keep its independence even
though it has been repeatedly criticised by the French government.
Its board has rejected chief executive Daniel Bouton’s offers to
resign.
JPMorgan and Morgan Stanley are underwriting a €5.5 billion capital
increase by SocGen to repair its capital, in an issue that has just
been launched at a deep discount.
