When Societe Generale SA Chief Executive Officer Slawomir Krupa unveiled his new strategy last month, he refused to provide any details about which parts of the lender he’d like to sell.
(Bloomberg) — When Societe Generale SA Chief Executive Officer Slawomir Krupa unveiled his new strategy last month, he refused to provide any details about which parts of the lender he’d like to sell.
While acknowledging that the lack of clarity was “an element of frustration” for investors, he said the information was “highly sensitive.” His argument was that when the bank had made such announcements in the past, it had gotten a bad deal as buyers subsequently resold assets at prices that were sometimes four times higher.
Still Krupa has given a few indications what conditions the units that he wants to keep should meet.
SocGen units must have an appropriate risk profile, offer scope for synergies, and achieve an “appropriate level of profitability delivered on a regular basis.”
Given those pointers — and based on previous reports from Bloomberg News — here’s a list of businesses that could be on the block.
Equipment Finance
SocGen has hired Lazard to advise on a possible sale of its equipment finance unit, known as SGEF, Bloomberg News reported last week.
The move would follow the French lender’s decision to sell that business in the Nordics region to Nordea Bank Abp almost four years ago. The remaining equipment finance operations had sparked the interest of potential suitors in recent years, one person said.
A spokesman for SocGen declined to comment.
SGEF provides leasing and other financing solutions for large machinery and vehicles to companies.
The unit, overseen by Odile de Saivre, employs about 1,400 staff, according to the latest annual report.
Securities Services
Krupa is also exploring a potential sale of custody unit Societe Generale Securities Services, which could fetch a valuation of more than €1 billion ($1.1 billion), Bloomberg News reported earlier.
With €4.7 trillion of assets under custody at the end of June, SocGen’s management considers the business to be too small. In comparison, BNP Paribas Securities Services had €12 trillion under custody.
While SGSS benefits from rising interest rates, its deep integration with the rest of the bank may make it hard to carve out.
Previous attempts to sell it were dropped because of high costs to separate it, a person familiar with the matter said.
Tunisia Exit
SocGen is also exploring options for its 52% stake in Tunisia’s Union Internationale de Banques as it reduces its footprint in Africa.
UIB had total assets worth 7.2 billion Tunisian dinars ($2.3 billion) at the end of last year and its market capitalization is currently about 730 million dinars.
The French bank already agreed to sell units in Congo, Equatorial Guinea, Mauritania and Chad earlier this year.
Profitability in Africa is “not at target,” Krupa said during the investor day.
It “does not yet cover, in our view, the implicit cost of equity.”
Other Countries
Krupa also hinted that he’s looking at every country where SocGen operates to question if the bank’s retail and commercial banking presence there still makes sense.
Local subsidiaries must generate a level of profitability that’s permanently above their cost of equity, he said during the investor day.
That cost varies between countries, partly because it also factors in geopolitical risks, he said.
If profitability doesn’t meet the threshold, the bank will do what’s necessary to improve performance.
The measures may include disposals “wherever we could conclude that we are not the right long-term owner of a given business,” Krupa said.
What He Wants to Keep
Krupa has also made pretty clear that he’s unlikely to sell the digital consumer bank Boursorama or the car leasing unit ALD, which was renamed Ayvens on Monday.
In his investor day presentation, the CEO highlighted the two units as the only ones that will receive additional capital.
Both have “promising prospects in terms of long-term profitability,” Krupa said.
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