Société Générale chief says banking mergers make sense in Europe
Frédéric Oudéa thinks consolidation will start once eurozone banking union is completed
The chief executive of French bank Société Générale has said mergers between big European lenders “make sense” and are likely to start once the “fundamental obstacles” to consolidation of the sector are lifted.
Frédéric Oudéa was speaking to the Financial Times less than two weeks after Deutsche Bank and Commerzbank abandoned merger talks having decided that integrating Germany’s two biggest banks would be too difficult and costly.
European rivals such as ING, UniCredit, BNP Paribas and SocGen are all seen as potential suitors for Commerzbank. Analysts say the sector is ripe for consolidation, pointing to a competitive and fragmented market and a low interest rate environment that compresses banks’ profit margins.
Mr Oudéa, who declined to comment on the speculation about Commerzbank, said that long-term “consolidation should make sense”. He added that this is impeded by national regulations on capital and liquidity, as well as a different legal framework for bankruptcy laws in different countries across the bloc.
While the eurozone has made progress on banking union in areas such as a single supervisory mechanism and a single resolution authority, slow progress in other areas means the project remains incomplete.
SocGen is engaged in a far-reaching overhaul to eliminate 1,600 jobs and cut €500m of costs after missing financial targets because of poor performance in its trading unit. Its shares have fallen over a third in the past year, underperforming most rivals.
Meanwhile, as part of the restructuring SocGen is refocusing its global markets business. “We’ve decided to review our full spectrum of activities and focus on where we have a definite edge,” said Mr Oudéa, who is due to give a presentation to investors and analysts on Tuesday.
The bank aims to strengthen its position in cross-asset investment solutions and beef up its financing division, while closing some areas including over-the-counter commodities and proprietary trading. It is downsizing both its prime services division and its fixed income and currencies trading operations.
Mr Oudéa said he expects this year will mark an “inflection point” for SocGen’s retail bank in France, where years of low interest rates have weighed on returns. He said revenues in the French retail bank “will go back to growth next year” and predicted operating costs will also start to decrease from 2020. “We are on the verge of reaping the fruits of the investments made in the last three or four years,” he added.
In France, the group’s retail activities are split across its Crédit du Nord and SocGen networks, and its online bank Boursorama. Mr Oudéa said it is focusing on “digitising the processes” for daily banking transactions, such as accessing loans and mortgages online, “but also having a human presence to deliver advisory services, in particular for important projects or wealth management”.
As part of its plan to accelerate growth in online banking, Mr Oudéa said SocGen had set a new target of growing Boursorama’s client base from 1.8m to more than 3m by 2021.