Rivals seen circling crisis hit SocGen
The French government rose to the defence of beleaguered Societe Generale even as speculation mounted on Monday that the bank could face a takeover or become a break up target like Dutch bank ABN AMRO if no single buyer wants all its assets.
By Agencies |
PARIS: The French government rose to the defence of beleaguered Societe Generale even as speculation mounted on Monday that the bank could face a takeover or become a break up target like Dutch bank ABN AMRO if no single buyer wants all its assets.
French economy minister Christine Lagarde said on Monday that SocGen, hit by $7 billion in losses from rogue trades, was under no pressure to merge with another bank as its shares plunged. “Societe Generale is under no constraint to merge with another financial company,” Lagarde .
SocGen’s shares tumbled on Monday after Citigroup said the French bank’s franchise was “severely impaired”. The shares fell by 9% percent in early trading. Citigroup also speculated that HSBC, which has a big retail and commercial banking presence in France, might be interested in buying SocGen.
Lagarde’s statement was the latest sign that France’s establishment is rallying round to SocGen’s defence in an attempt to stave off talk that a foreign rival might launch a takeover bid as the company’s market value sinks. A top adviser to president Nicolas Sarkozy warned on Sunday the government would probably intervene if raiders made a move.
SocGen’s chairman, Daniel Bouton, who last week offered to leave but was asked to stay on by the board, went to London on Monday to drum up support for the bank’s euro 5.5 billion emergency share issue, which has already been underwritten by two US investment banks.
Jerome Kerviel, the 31 year old trader accused by SocGen of unauthorised dealing that led to $7.2 billion in losses, was charged with attempted fraud by the French financial police. Kerviel was charged on four counts, including abuse of trust and attempted fraud, Paris prosecutor Jean-Claude Marin said. The most serious of the charges is the abuse of trust, which carries a seven-year prison sentence and a fine of euro 7,0,000.
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The bank’ big size and diverse mix of businesses may make it too large and unwieldy a target for any single bidder, analysts said. “A break up scenario of ABN AMRO is looking increasingly possible for SocGen,” said Keefe Bruyette & Woods analysts Jean-Pierre Lambert and John Holmes. But SocGen’s euro 35 billion market value may make it a stretch for most in the current difficult credit environment and has prompted some touted suitors for the whole bank to rule themselves out.Italy’s Unicredit, for example, said on Friday it does not plan any acquisitions in the short term. The Italian bank had held talks with SocGen last year and has a track record of aggressive growth through large acquisitions. Another potential bidder, BNP Paribas, is not said to be enthused by the thought of having to integrate its rival’s investment bank in the event of a full takeover.
“I don’t think SG can, in the current context, keep its independence,” said Francois Chaulet, a fund manager at Montsegur Finance. “A French solution would be a joint offer by French bank Credit Agricole and BNP,” said Keefe Bruyette’s Lambert and Holmes. “Credit Agricole might nominally have to take over SG and then sell on the retail banking operations to BNP.”
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