Société Générale

Société Générale S.A.
Type Public (Euronext: GLE)
Founded May 4 1864
Headquarters Flag of France.svg 29, Boulevard Haussmann 75009 Paris, France
Key people Daniel Bouton, Chairman
Frederic Oudea, CEO
Philippe Citerne, Co-CEO
Industry Finance and Insurance
Products Financial Services
Revenue ▲ € 76.62 billion (2008)
Net income ▼ € 0.960 billion (2008)
Total assets € 1.16 trillion
Employees 130,100 (2007)[1] In 77 countries worldwide.
Website www.socgen.com

Société Générale (Euronext: GLE) is one of the main European financial services companies and also maintains extensive activities in others parts of the world. It is headquartered in France with the main head office in Tours Société Générale in the business district of La Défense west of Paris. The three main divisions are Retail Banking & Specialized Financial Services (particularly in France and Eastern Europe), Corporate and Investment Banking (Derivatives, Structured Finance and Euro Capital Markets) and Global Investment Management & Services.

Société Générale is one of the oldest banks in France. The original name was Société Générale pour favoriser le développement du commerce et de l'industrie en France (English: General Society to Support the Development of Commerce and Industry in France). Société Générale is often nicknamed SocGen in the international financial world.

The long term debt of the group is currently ranked AA by S&P, Aa2 by Moody's and AA- by Fitch.[2]

The 2007 financial results were sharply lower, affected by depreciations and a fraud of € 4.9 billion.

Contents

History

1864 - 1893

The bank was founded by a group of industrialists and financiers during the second empire, on May 4 1864, to support the development of commerce and industry in France. The bank's first chairman was the prominent industrialist Eugène Schneider (1805-1875) followed by Edward Blount, a Scotsman.

The company started to hire employees and establish offices. Coverage of France went ahead at a steady rate. By 1870, the bank had 15 branches in Paris and 32 in the rest of France. It set up a permanent office in London in 1871. At the beginning, the bank used its own resources almost entirely for both financial and banking operations. In 1871, Société Générale moved into the public French issues market with a national debenture loan launched to cover the war indemnity stipulated in the Treaty of Frankfurt.

From 1871 to 1893, France went through a period of economic gloom marked by the failure of several banking establishments. The company continued to grow at a more moderate pace; in 1889, there were 148 banking outlets, demonstrating the group's capacity to withstand unfavourable economic conditions.

1894 - 1930

Société Générale's central branch, in Paris, now a Monument historique

Starting in 1894, the bank set up the structures characterising a large, modern credit institution. As well as collecting company and private deposits, its branches started to provide short-term operating credits for industrialists and traders. It also moved into placing shares with the general public, issuing private debenture loans in France and also in Russia. Acquisition of equity stakes became a more secondary activity. The company's excellent financial health allowed it to expand its shareholding structure. In 1895, Société Générale had 14,000 shareholders; in 1913, they numbered 122,000. The war years were difficult and had serious consequences with the loss of Russian business. However, during the 1920s Société Générale became France's leading bank: its network had grown sharply since the 1890s, with a huge number of branches and seasonal offices allowing in-depth penetration of the provincial market (260 seasonal offices in 1910 and 864 in 1930). The number of sales outlets rose from 1,005 in 1913 to 1,457 in 1933 (including those operated by Sogenal). Thanks also to the dynamism of supervisory and management staff at head office and in the branch offices it moved ahead of Crédit Lyonnais (in terms of deposits collected and loans distributed) between 1921 and 1928. To satisfy the requirements of investing companies, Société Générale created a subsidiary, Calif, specialised in medium-term credit in 1928.

1931 - 1945

The 1930s were another difficult period. Given the decline in international and French business, the bank was forced to rationalise its network by closing down local branches. On the eve of World War II, the number of sales outlets was not much greater than in 1922. However, Société Générale was active in placing numerous public loans launched during this period by the State or the colonies. The war and the German Occupation interrupted its advance, but the bank moved into Africa and the United States.

1945 - 1964

Société Générale was nationalised in 1945. It now had a single shareholder: the State. The period from 1945 to 1958 was characterised in France by rapid economic recovery but also a greater disequilibrium in the balance of payments, calling for continued exchange controls and virtually permanent credit control measures. It was not until 1959 that the economy really recovered, but credit controls were reinforced due to persistent inflationary pressures. Sharp growth in production and foreign trade opened up new areas of business for the banks. The industry underwent some quite radical changes, one of the most striking of which was much greater specialisation of credit. The range of banking services on offer expanded uninterruptedly. Thanks to its presence in New York, Société Générale was able to take advantage of the flow of business generated by the Marshall Plan. Société Générale continued to expand in France and elsewhere. It moved into Italy and Mexico and altered the status of its establishments in Africa after decolonisation, in accordance with the laws passed by these newly independent countries.

1965 - 1990

Société Générale twin towers in La Défense

Société Générale gave new impetus to its French network, with an acceleration in growth after 1966 following elimination of prior authorisation for opening branch offices. International expansion was just as vigorous. It was no longer limited, as before, to the main financial centres (London, New York), neighbouring countries (Belgium, Spain) and the former colonies, with the primary aim of facilitating the business of French firms, but was also aimed at guaranteeing the bank's presence where new markets were developing, either to export the technical expertise it had acquired in certain fields, or to keep up its contact with the multi-nationals. 1966 and 1967 represented a fundamental turning point in banking regulations, the main development being attenuation of the distinction between deposit and investment banking, and creation of the home mortgage market. Société Générale took advantage of this and acquired leading positions in some new financing techniques designed primarily for companies, such as finance leasing, setting up specialised credit subsidiaries for this purpose. The 1970s were characterised by two major developments: expansion of the international network and across-the-board introduction of IT facilities to cope with extension of the customer base and the development of deposit money. In 1971, the appearance of automatic cash machines crowned the success and development of the credit card. In 1973, Société Générale opened its representative office in the Soviet Union. From the beginning of the 1980s, against a backdrop of deregulation and technological change, internationalisation of the markets and the emergence of new financial instruments, Société Générale set itself two commercial objectives. It focused increasingly on private customers via its network of branches and by acquiring specialised subsidiaries. It pursued and expanded its activities in the capital markets in France, and then, on a selective basis, in the different international financial centres. On 29 July 1987, Société Générale was privatised. It had been chosen from among the three leading French commercial bank nationalised in 1945 for its excellent risk-coverage, equity and productivity ratios.

Since 1991

In recent years, the Société Générale Group has focused on developing its activities around three core businesses through a combination of organic growth and acquisitions.

Retail Banking was strengthened in 1997 through the acquisition of Crédit du Nord, highlighting the Group's determination to capitalise on the restructuring of the French banking system. At the same time, Société Générale has looked to secure the long-term loyalty of its customers (launch of "one account number for life" and introduction of Jazz, a package of service offers). In 1999 it engaged in merger negotiations with the bank Paribas, but was outflanked by a competitor, the Banque Nationale de Paris (BNP).

In 1998, Société Générale set up Retail Banking outside France as a separate division, underscoring the Group's resolve to make this business one of its strategic development axes. This activity was also strengthened in 1999 through the acquisitions made in Romania (BRD - Groupe Société Générale), Bulgaria (Société Générale Expressbank) and Madagascar. This external growth strategy has been manifested through acquisitions in Central Europe (Komerční Banka in the Czech Republic and SKB Banka in Slovenia) in 2001.

At that time, Société Générale is officially concerned with money laundering scandal and underground economy.[3]

In 2001, Société Générale acquired a controlling interest in the TCW Group. The TCW Group, which was founded in 1971, was originally known as Trust Company of the West and is the parent of TCW/Crescent Mezzanine one of the leading mezzanine capital firms in the US.[4][5] Today, the TCW Group operates as a subsidiary of Societe Generale Asset Management.

Africa is also a major area of interest for the bank, with the 2002 purchase of Eqdom in Morocco (the market leader in consumer lending) and Union International de Banque in Tunisia. In addition, 51% of SSB Bank in Ghana in 2003 and 50% of Geniki Bank in Greece in 2004 were acquired . In terms of specialized financial services, a department created in mid-2001, the purchase of two Deutsche Bank subsidiaries, ALD Automotive for multi-brand auto leasing and financing and GEFA for corporate sales financing enabled Société Générale to increase its European presence in these sectors. In 2002, it continued to pursue its external growth strategy by purchasing Hertz Lease, a European subsidiary specializing in long-term leasing and fleet management for Ford Motor Company vehicles.

With a track record as leader in France for financial savings products (mutual funds, investment funds, company savings plans), the Group has developed its Asset Management and Private Banking activities: in 1999, its subsidiary, Société Générale Asset Management, pursued the strategy of developing both its mutual fund management business in France and its activities aimed at major institutional investors at an international level. With the launch of Société Générale AM UK in London and the acquisition of Yamaichi in Japan, Société Générale Asset Management has taken a decisive step in establishing its international presence and is now able to offer its customers truly global fund management capabilities. Société Générale also has a worldwide presence in private banking activities. After pursuing a deliberate policy of acquisitions in 1998, Société Générale Private Banking consolidated and developed its franchise in 1999 against a backdrop of tougher competition.

During the 1st quarter 2004, the third branch of activity of the Société Générale Group, GIMS Global Investment Management and Services was created. In February 2004, Société Générale set up a new division named SG GSSI, Global Securities Services for Investors, which provides full investor services on securities and listed derivatives covered by the group around the world. SG GSSI is attached to the GIMS which regroups SG Asset Management, SG Private Banking and SG Global Securities Services for Investors. GIMS employs 7,600 people.

Société Générale is developing its Corporate and Investment Banking businesses under the SG CIB brand name, which was introduced by the Group in 1998. Bolstered by a sound client base and a recognised capacity for innovation borne out by the league tables (the Group is ranked among the global leaders in equity derivatives, convertible bonds, export finance, etc.), Société Générale is looking to develop its M&A, advisory and IPO activities through the acquisition of specialised firms (Hambros in the United Kingdom, Barr Devlin in the United States).

French reporter Denis Robert and former #3 of Cedel Ernest Backes, have accused Société Générale of having non-published accounts in Clearstream, which is at the centre of a financial scandal. The bank denied those accusations.

January 2008 trading loss incident

Main article: January 2008 Société Générale trading loss incident

On January 24, 2008, the bank announced that a single futures trader at the bank had fraudulently lost the bank 4.9 billion euros (an equivalent of 7.2 billion dollars), the largest such loss in history.[6][7] The company did not name the trader, but other sources identified him as Jérôme Kerviel, a relatively junior futures trader who allegedly orchestrated a series of bogus transactions that spiraled out of control amid turbulent markets in 2007 and early 2008.[8]

Partly due to the loss, that same day two credit rating agencies reduced the bank's long term debt ratings: from AA to AA- by Fitch; and from Aa1/B to Aa2/B- by Moody's (B and B- indicate the bank's financial strength ratings).[2][9]

Executives said the trader acted alone and that he may not have benefited directly from the fraudulent deals. The bank announced it will be immediately seeking 5.5 billion euros in financing. On the eve and afternoon of January 25, 2008, Police raided the Paris headquarters of Société Générale and Kerviel's apartment in the western suburb of Neuilly, to seize his computer files.[10] French presidential aide Raymond Soubie stated that Kerviel dealt with $73.3 billion (more than the bank's market capitalization of $52.6 billion). Three union officials of Société Générale employees said Kerviel had family problems.[11] On January 26, 2008, the Paris prosecutors' office stated that Jerome Kerviel, 31, in Paris, "is not on the run. He will be questioned at the appropriate time, as soon as the police have analysed documents provided by Société Générale."[12] Kerviel was placed under custody but he can be detained for 24 hours (under French law, with 24 hour extension upon prosecutors' request). Spiegel-Online stated that he may have lost 2.8 billion dollars on 140,000 contracts earlier negotiated due to DAX falling 600 points.[13]

The alleged fraud was much larger than the transactions by Nick Leeson that brought down Barings Bank.

February 2008

Société Générale SA says it had a net loss in the fourth quarter of 2007 after the French bank took a €4.9 billion ($7.18 billion) hit closing the unauthorized trading positions of Jérôme Kerviel.[14]

Activity

Société Générale is the 3rd largest Corporate and Investment bank in the Eurozone by net banking income and the 6th largest French company by market capitalization. It employs 120,000 people, of which 75,000 in Europe, and maintains a presence in 80 countries. The bank is active in the finance, investment and asset management markets.

In France, Société Générale is active in retail banking with more than 2,700 branches (including its Crédit du Nord banking division).

SG CIB Société Générale Corporate and Investment Banking, the Corporate and Investment Banking arm of the Société Générale Group, is the 3rd largest corporate and investment bank in the euro zone by net banking income. Société Générale Corporate and Investment Banking serves corporates, financial institutions and investors in over 45 countries across Europe, the Americas and Asia. It provides value-added integrated financial solutions and is a reference bank in its three specialist areas: Euro Capital Markets, Derivatives and Structured Finance.[15][16]

Leadership

Since 1997, the Chairman of Société Générale has been Daniel Bouton, a former cabinet director under Alain Juppé. In May 2008, Daniel Bouton was left Chief Executive Officer to Frederic Oudea.

Affiliates

Affiliates of SG include:

Fimat businesses involve a range of clearing and execution services on listed or OTC derivatives and cash products.[21]

Fimat was created in 1986, following the creation of the Paris-based MATIF (Marché à Terme International de France), the French Futures and Options Exchange, in February 1986. In 2005 Fimat completed the acquisition of Cube Financial.

Merged in January 2008 with Calyon Financial to form Newedge ([www.newedgegroup.com]). Newedge's holders are SG and Calyon.

See also

Notes and references

  1. ↑ BBC NEWS | Business | French trader under investigation
  2. ↑ 2.0 2.1 Ratings for Société Générale
  3. ↑ Beau linge et argent sale, Jean-Pierre Thiollet, p. 111, Paris, Anagramme Ed, 2002
  4. ↑ Societe Generale banks on TCW to build its reach in alternatives. Pensions & Investments, April 2001
  5. ↑ FRENCH BANK TAKES A STAKE IN TRUST COMPANY. New York Times, April 2001
  6. ↑ Agence France-Presse (2008-01-24). "Rogue trader blamed for 4.9 billion euro fraud at Société Générale". 
  7. ↑ "Press release" (2008-01-24).
  8. ↑ "Jerome Kerviel named in €5bn bank trading fraud" (2008-01-24). 
  9. ↑ Societe Generale Uncovers Massive Fraud, EMMA VANDORE, Associated Press
  10. ↑ afp.google.com, Police raid HQ of bank in French rogue trader scandal
  11. ↑ ap.google.com, French Police Search Societe Generale
  12. ↑ uk.reuters.com, SocGen trader not on the run says prosecutors
  13. ↑ afp.google.com, French police interrogate rogue trader
  14. ↑ SocGen posts $4.91B net loss for 4Q
  15. ↑ Equity Derivatives House of the Year - Société Générale Risk magazine
  16. ↑ "Societe Generale Bilan-Social 2006" (PDF).
  17. ↑ Njegoskij|org :: La Société Générale prend le contrôle de Podgoricka Banka a.d. (fr)
  18. ↑ Njegoskij|org :: Diplomatic clippings on the acquisition of Podgoricka Banka a.d.
  19. ↑ Njegoskij|org :: Official report on the privatization of Podgoricka Banka a.d.
  20. ↑ Njegoskij|org :: Podgoricka Banka will not suffer from the "Société Générale affair" in France
  21. ↑ Fimat, the Futures King (Business Wire)

External links

CAC 40 companies of France

Accor · Air France-KLM · Air Liquide · Alcatel-Lucent · Alstom · Arcelor Mittal · AXA · BNP Paribas · Bouygues · Capgemini · Carrefour · Crédit Agricole · Dexia · EADS · EDF · Essilor · France Télécom · GDF Suez · Groupe Danone · L'Oréal · Lafarge · Lagardère · LVMH · Michelin · Pernod Ricard · PSA Peugeot Citroën · PPR · Renault · Saint-Gobain · Sanofi-Aventis · Schneider Electric · Société Générale · STMicroelectronics · Suez Environnement · Total · Unibail-Rodamco · Vallourec · Veolia Environnement · VINCI · Vivendi