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September 2009 | ifr special report | 7 FRANCE French bank equity prices Commenting on other initiatives:

“We are a leader in euro-denominated bonds in Europe and we want to consolidate that position,” said Papiasse. “We will keep investing in that market. We want to develop more distribution with long funds and asset managers, especially in the US.” He also indicated a desire to up the bank's presence in US dollar issues.

A unified approach The other leading French player, Societe Generale CIB, is focussing on strengthen- ing the coverage of its three core divisions: investment banking; global finance; and global markets. Despite dividing the business into three divisions the bank's aim is on providing a unified face to customers. “Teams work as one for the client. Different specialists can be brought in for specific tasks,” said Jean Francois Mazaud, deputy head of global finance with SG CIB.

The unified theme is replicated across other areas of the business. In the global markets division, the bank has sought to exploit synergies by putting together a unified equity and fixed income research team, devising unified structured solutions for investors and setting up a global trading unit overlooking debt and equity, said Mazaud.

SG CIB has a strong historical presence in derivatives, structured finance and capital markets, where it maintains a global reach. And the economic downturn has opened an opportunity for the bank to beef up its M&A team. “On the issuer side, we have long lasting recognised franchises in equity and debt capital markets, financing and hedging,” said Mazaud. “Even if M&A volumes are down, there’s no doubt that they will bounce back while the global economy will recover. It therefore makes sense for us to further develop our M&A business now.” The bank is therefore looking to add up to 35 M&A and senior bankers by the first quarter of 2010.

“More generally, the credit crunch is a unique opportunity to enhance our investment banking franchise, said Mazaud. “Many rivals have either disappeared or are tied up with internal re- structuring. Against that, client needs are intact – or have even increased. Having in front of them global, organised, and pro-

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active banking partners seems to make the difference, from what we hear." The crisis has brought about a complete change of approach in areas such as lending, Mazaud added. Corporate clients are finding it increasingly difficult to raise capital in the way they did in the pre- crunch days. SG believes its wide range of products and solutions, coupled with a high level of coordination and integration, stand it in good stead in this new environment. Its leading position in convertible bonds has come in handy with so many corporates looking to refinance their balance sheets. Meanwhile in the primary bond market, where the bank is number three in the world, the strategy is to remain in the top five. The bank does have an obvious gap in corporate brokering in the UK, which some have suggested it could attempt to plug. “We could look into this, but there is considerable concentration in this space,” said Mazaud. “We have made some good progress in the UK without this.” Indeed, SG CIB has been involved in book running or underwriting rights issues or convertibles for UK-based corporates.

SG CIB's net revenues were €1.28bn in the second quarter 2009, compared with €655m in the second quarter of 2008. Gains were led by big improvements in fixed income, commodities and currencies, equities and financing and advisory businesses. But it made an operating loss of €104m, compared with a loss of €359m over the same period last year – mainly, it insisted, due to various one-off provisions and write-downs relating to CDS positions and a tightening of credit spreads. Nonetheless, the underlying picture for SG CIB is healthy, promising growth.

On the mend At Calyon, owned by Credit Agricole, the signs indicate a positive response to an earlier restructuring programme, and to improving market conditions. It slashed costs by 10%, downsized its operations and lowered its risk profile, for example reducing its exposure to exotic derivatives.

Calyon has fallen back on its three core activities: structured finance and commercial banking; brokerage; and fixed income and forex. At the time there was concern that these measures would suffocate growth potential. Yet it seems the investment banking business is stabilising and it is confident of making sustainable profits going forward. In the three months ended June 30, Calyon narrowed its loss to €87m from €855m a year earlier – a combination of costs relating to discontinued activities and write-downs on derivatives keeping the unit in the red.

Natixis, majority owned by BPCE and recently formed from the merger of Banque Populaire and Caisse d'Epargne, has been the hardest hit of the French investment banks by financial turbulence. But in late August the struggling bank was given a major boost when BPCE agreed to provide a safety net for €35bn worth of its toxic assets. The move represents a major step in its rehabilitation, according to analysts, some of whom don’t rule out the need for a further rescue in the future. After five straight quarters of losses it could return to profit as early as Q3, according to Francois Perol, BPCE’s chief executive.

During Q2 2009 Natixis reported a loss of €883m, compared with a deficit of €1.017bn the same time a year ago.

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BNP rebased Societe Generale

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