Société Générale’s (SG) global banking and investor solutions division, which encompasses corporate and investment banking (CIB), private banking, asset and wealth management and securities services, will play a key role in delivering the bank’s 2014-2016 strategic and financial plan, said the bank’s chairman and chief executive officer Frederic Oudea.
According to SG’s 2014-2016 strategic and financial plan released today during an investor day in Paris, hosted by Oudea and the group’s senior management team, Société Générale is now well-positioned to gain market share in a changing CIB’s industry landscape, where many players are still reviewing their strategies and reducing the scope of their activities.
“Having already completed the refocusing of the portfolio and the reinforcement of the balance sheet, the group is now fully ready to deliver profitable growth in the future by taking advantage of its strengths: a balanced business mix with solid retail and corporate and investment banking expertise, high organic growth potential, a focus on client satisfaction and innovation, as well as strong management and group values,” said Oudea.
The French bank said it will focus on taking advantage of the increasing disintermediation in Europe as well as of the development of new products and services related to the post-trade services evolution, thanks notably to its recent acquisition of Newedge.
Cross-asset solutions
SG said that it will bolster its position in flow equity derivatives, where significant potential remains through expansion in Germany, Asia and the US, It will also take advantage of positive trends to grow its cross-asset solutions (structured products) business. In this segment, SG expects an annual revenue growth of 1% up to 2016.
The bank also expects to be at the forefront of the “post-trade services revolution”, and is aiming at an annual revenue growth of 12% by 2016, by fully integrating Newedge as well as developing its prime services division; enhancing its custody and fund administration platform and developing value-added post-trade services.
SG also said it will strengthen its private banking and Lyxor coverage in core European markets with a target of more than €35bn additional assets under management (AUM), with expected annual revenue growth of 4% by 2016.
After having sharply reduced its risk profile since 2007, SG expects to capitalise on its client-driven model by maintaining a resource-efficient set-up. In relation to its footprint, the bank will accelerate the development of business with corporates through the taking on board of 100 new clients (+9% in annual revenue growth by 2016), enhancing its presence among financial institutions (+4%), and expanding its high net worth individual client base in Europe (+4%).
Financing and advisory
In the financing and advisory businesses, SG is aiming to achieve 8% annual revenue growth by 2016 by allocating more capital with a view to growing natural resources and structured financing activities; using available long-term funding capabilities and increasing origination-to-distribution capabilities; and accompanying credit disintermediation in Europe through the strengthening of primary market activities (USD platform and high yield).
“2014-2016 will be a new phase of development for the bank during which we intend to leverage the full potential of organic growth, synergies and operational efficiency of our model to reach a return on equity above 10% by 2016,” Oudea said.
Oudea added that SG has successfully completed the first phase of its transformation to meet the requirements of Basel 3 regulations with a reinforced balanced sheet, a strengthened risk profile and a refocus of its activities.
Strategic priorities
According to Oudea, all businesses will contribute to the group’s growth with an overall combined target of 3% annual average revenue increase.
The main growth drivers will be international retail banking (principally in Africa, Eastern Europe and Russia), insurance and financial services to corporates, private banking in Europe, financing and advisory, and investor services (benefiting from the integration of Newedge).
More modest growth is expected from mature retail banking markets (France and the Czech Republic) and other market activities; while the group’s organic growth is expected to be fuelled by increased synergies generated by its universal banking model thanks to cross-selling revenues within each core pillar as well as between core pillars.
In 2013, cross-selling revenues amounted to €5.5bn, representing 25% of the group’s total revenues. In the future, the group wants to increase revenue growth from synergies and has identified new levers to do so including increased cooperation between private banking and retail networks; cooperation across investor services; deepening and widening the footprint of the bancassurance offering; and expanding its global transaction banking platform to serve all its corporate clients.
Q1 results
The release of SG’s 2014-2016 strategic and financial follows the bank’s Q1 2014 results which were published last week. In its Q1 2014 report, the French bank said that revenues in its global markets unit were down -7.9% at €1.2bn while the business’s contribution to group net income amounted to €316m in Q1 2014.
SG’s equity activities, saw an increase in revenues of +9.3% to €688m versus Q1 13 against the backdrop of a positive market momentum favourable to cash and flow activities, particularly in Europe. The bank said its CIB division maintained a leadership position in equity derivatives, with a market share of 12.0% in warrants, while structured products continued to turn in a strong commercial performance in Q1 14.
The bank’s fixed income, currencies and commodities revenues were down -25.3% to €556m versus Q1 13 which represented a high comparison base in a challenging market environment for rate activities which were hit by low volumes, tighter margins and continued macroeconomic uncertainty, both for flow and structured products.
Click on the link to read SG’s 2014-2016 strategic and financial plan.Click here to read SG’s Q1 2014 results.
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