By Fabio Benedetti-Valentini
Nov. 3 (Bloomberg) -- BNP Paribas SA, France’s biggest bank, pulled further ahead of Societe Generale SA during the financial crisis, emerging twice as large by assets and deposits.
BNP Paribas, like JPMorgan Chase & Co. in the U.S. and Banco Santander SA of Spain, took advantage of competitors’ woes to make acquisitions. The Paris-based bank became the biggest by deposits in the euro region with the 10.4 billion-euro ($15.4 billion) purchase of Fortis units this year.
“The Fortis deal is amazingly attractive for BNP,” said Jaap Meijer, a London-based analyst at Evolution Securities Ltd. who rates BNP Paribas “buy” and Societe Generale “sell.”
Societe Generale, which announced a record trading loss in January 2008, has also been hobbled by at least 8 billion euros of asset writedowns, company reports show. BNP Paribas will probably report third-quarter net income of 1.26 billion euros on Nov. 5, analysts surveyed by Bloomberg estimated. That compares with 399 million euros in profit at Societe Generale, which will publish earnings tomorrow, the analysts said.
BNP Paribas climbed 81 percent this year in Paris trading, while Societe Generale advanced 34 percent. BNP Paribas’s market value, at 62.9 billion euros, is 87 percent larger than Societe Generale’s. In May 2007, before the crisis took hold, the gap was as narrow as 12 percent.
Spokeswomen at BNP Paribas and Societe Generale declined to comment.
Takeover Battle
The rivalry between the two banks, France’s largest by market value, intensified a decade ago when Michel Pebereau, then head of Banque Nationale de Paris SA, snatched investment bank Paribas SA away from Societe Generale in a takeover battle and made a hostile bid for the bank itself. Societe Generale, led at the time by Daniel Bouton, evaded Pebereau’s grasp.
Bouton, 59, embarked on an expansion into eastern European countries including Romania and the Czech Republic, and gained close to 3 million consumer-banking clients in Russia by acquiring control of OAO Rosbank last year. He built the bank’s equity derivatives business into the world’s No. 2 by revenue in 2008, according to a June 10 report by JPMorgan analyst Kian Abouhossein in London.
In January of last year, Societe Generale shocked investors by reporting a 4.9 billion-euro trading loss, which it blamed on unauthorized bets by Jerome Kerviel, a trader on its Delta One desk. The bank announced 2.05 billion euros of writedowns tied to the credit crunch the same day. Societe Generale’s corporate- and investment-banking unit has been unprofitable in five of the last seven quarters.
The 32-year-old Kerviel, who was charged with abuse of trust, forging documents, and hacking into the bank’s computers, has said his superiors knew of his trading activity. His trial order is under appeal.
Management Departures
Societe Generale also met with setbacks including losses of at least 1.5 billion euros on a portfolio of illiquid assets and a 300 million-euro writedown in Russia. Bouton stepped down as chairman in May, after ceding the CEO job to Frederic Oudea the previous year. Oudea, 46, now holds the chairman role as well.
“Societe Generale has found the crisis humbling,” said Simon Maughan, a London-based analyst at MF Global Securities Ltd. who recommends selling the shares.
By Fabio Benedetti-Valentini
Nov. 3 (Bloomberg) -- BNP Paribas SA, France’s biggest bank, pulled further ahead of Societe Generale SA during the financial crisis, emerging twice as large by assets and deposits.
BNP Paribas, like JPMorgan Chase & Co. in the U.S. and Banco Santander SA of Spain, took advantage of competitors’ woes to make acquisitions. The Paris-based bank became the biggest by deposits in the euro region with the 10.4 billion-euro ($15.4 billion) purchase of Fortis units this year.
“The Fortis deal is amazingly attractive for BNP,” said Jaap Meijer, a London-based analyst at Evolution Securities Ltd. who rates BNP Paribas “buy” and Societe Generale “sell.”
Societe Generale, which announced a record trading loss in January 2008, has also been hobbled by at least 8 billion euros of asset writedowns, company reports show. BNP Paribas will probably report third-quarter net income of 1.26 billion euros on Nov. 5, analysts surveyed by Bloomberg estimated. That compares with 399 million euros in profit at Societe Generale, which will publish earnings tomorrow, the analysts said.
BNP Paribas climbed 81 percent this year in Paris trading, while Societe Generale advanced 34 percent. BNP Paribas’s market value, at 62.9 billion euros, is 87 percent larger than Societe Generale’s. In May 2007, before the crisis took hold, the gap was as narrow as 12 percent.
Spokeswomen at BNP Paribas and Societe Generale declined to comment.
Takeover Battle
The rivalry between the two banks, France’s largest by market value, intensified a decade ago when Michel Pebereau, then head of Banque Nationale de Paris SA, snatched investment bank Paribas SA away from Societe Generale in a takeover battle and made a hostile bid for the bank itself. Societe Generale, led at the time by Daniel Bouton, evaded Pebereau’s grasp.
Bouton, 59, embarked on an expansion into eastern European countries including Romania and the Czech Republic, and gained close to 3 million consumer-banking clients in Russia by acquiring control of OAO Rosbank last year. He built the bank’s equity derivatives business into the world’s No. 2 by revenue in 2008, according to a June 10 report by JPMorgan analyst Kian Abouhossein in London.
In January of last year, Societe Generale shocked investors by reporting a 4.9 billion-euro trading loss, which it blamed on unauthorized bets by Jerome Kerviel, a trader on its Delta One desk. The bank announced 2.05 billion euros of writedowns tied to the credit crunch the same day. Societe Generale’s corporate- and investment-banking unit has been unprofitable in five of the last seven quarters.
The 32-year-old Kerviel, who was charged with abuse of trust, forging documents, and hacking into the bank’s computers, has said his superiors knew of his trading activity. His trial order is under appeal.
Management Departures
Societe Generale also met with setbacks including losses of at least 1.5 billion euros on a portfolio of illiquid assets and a 300 million-euro writedown in Russia. Bouton stepped down as chairman in May, after ceding the CEO job to Frederic Oudea the previous year. Oudea, 46, now holds the chairman role as well.
“Societe Generale has found the crisis humbling,” said Simon Maughan, a London-based analyst at MF Global Securities Ltd. who recommends selling the shares.
Jean-Pierre Mustier, 48, the head of Societe Generale’s investment bank at the time of the trading loss, left the bank in August. Philippe Citerne, 60, who oversaw the bank’s Russian activities, also left this year.
Prot, Pebereau
At BNP Paribas, CEO Baudouin Prot, 58, and the 67-year-old Pebereau, now chairman, weathered the crisis. The bank, whose freezing of three funds on Aug. 9, 2007, signaled a deepening of the credit crunch, has posted about 7.2 billion euros of writedowns and provisions related to the financial crisis, according to company reports.
The bank had net income of 3.16 billion euros in the first half, compared with 31 million euros at Societe Generale. BNP Paribas’s assets reached 2.29 trillion euros at the end of June, more than double Societe Generale’s. BNP Paribas deposits totaled 606 billion euros by June 30, compared with 291.5 billion euros at Societe Generale.
In French consumer banking, where the companies’ networks are similar in size by clients, BNP Paribas had more than twice as many new account openings in 2008, company reports showed.
In the third-quarter, analysts estimated that Societe Generale’s writedowns probably amounted to 700 million euros, compared with 100 million euros at BNP Paribas.
“BNP had smaller provisions and writedowns in the first place,” said Jonathan Tyce, a London-based analyst at FBR Capital Markets. “Thanks to the Fortis deal, pre-provisions operating profit is even stronger than before the crisis.”
BNP Paribas and Societe Generale both sold new shares in October to repay a combined 8.5 billion euros of funds they got from the state to boost capital and sustain lending after Lehman Brothers Holdings Inc.’s failure shook markets last year.
To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net
Jean-Pierre Mustier, 48, the head of Societe Generale’s investment bank at the time of the trading loss, left the bank in August. Philippe Citerne, 60, who oversaw the bank’s Russian activities, also left this year.
Prot, Pebereau
At BNP Paribas, CEO Baudouin Prot, 58, and the 67-year-old Pebereau, now chairman, weathered the crisis. The bank, whose freezing of three funds on Aug. 9, 2007, signaled a deepening of the credit crunch, has posted about 7.2 billion euros of writedowns and provisions related to the financial crisis, according to company reports.
The bank had net income of 3.16 billion euros in the first half, compared with 31 million euros at Societe Generale. BNP Paribas’s assets reached 2.29 trillion euros at the end of June, more than double Societe Generale’s. BNP Paribas deposits totaled 606 billion euros by June 30, compared with 291.5 billion euros at Societe Generale.
In French consumer banking, where the companies’ networks are similar in size by clients, BNP Paribas had more than twice as many new account openings in 2008, company reports showed.
In the third-quarter, analysts estimated that Societe Generale’s writedowns probably amounted to 700 million euros, compared with 100 million euros at BNP Paribas.
“BNP had smaller provisions and writedowns in the first place,” said Jonathan Tyce, a London-based analyst at FBR Capital Markets. “Thanks to the Fortis deal, pre-provisions operating profit is even stronger than before the crisis.”
BNP Paribas and Societe Generale both sold new shares in October to repay a combined 8.5 billion euros of funds they got from the state to boost capital and sustain lending after Lehman Brothers Holdings Inc.’s failure shook markets last year.
To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net
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