Finance

Societe Generale’s investment bank sees 25% revenue jump amid equities trading rebound

Societe Generale’s investment bank jumped by 25% in the second quarter as the French bank’s flagship equities unit rebounded following a slump in the early days of the Covid-19 pandemic.

Its global banking and investor solutions unit, which houses its investment bank, posted revenues of €2.3bn, up by 25% on the previous year. Overall revenues at SocGen were €6.3bn, an increase of 18% and ahead of analyst expectations of €5.8bn, with its first-half performance the best in five years.

“These results are the fruit of extensive work undertaken for several years to enhance the intrinsic quality of the franchises,” said Frédéric Oudéa, the bank’s chief executive.

Its prized equities and prime services unit surged by five times to €758m after sharp losses during the height of the Covid-19 pandemic. SocGen, and most of its French rivals, unveiled sharp losses in the first half of 2020 after pandemic-induced volatility hit complex structured products within their equity derivatives units.

However, despite the boost to equities revenues, SocGen’s fixed income unit slipped by 33% to €470m, as the trading boom that has sustained investment banks through the pandemic has faded.

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The quarter was the first after Societe Generale unveiled another revamp of the unit in May, planning a bigger push into dealmaking and less reliance on its trading arm, which has been prone to more unpredictable revenues.

The unit is now run by Slawomir Krupa, who previously headed up its Americas business, and the latest changes were pushed through after the losses sustained by its flagship equity derivatives business during the Covid-19 crisis last year.

Societe Generale’s investment bank has gone through numerous revamps over the past two years. In November last year, it said it would cut 640 jobs within the unit, largely in France as it pulled back from some equity derivatives functions. This move followed 1,600 job reductions in 2019 as the bank unveiled plans to close its commodities and proprietary trading businesses and reorganise its smaller fixed income unit.

Its financing and advisory unit was up by 9.6% to €720m. SocGen’s latest revamp is focused on gaining more market share in dealmaking, where it lags most of its major Wall Street and European competitors. While US and European banks have unveiled sharp increases in advisory revenues amid a record deal boom, however, SocGen said its investment banking revenues were hit by a slowdown in debt capital markets activity.

“We definitely want to grow the global banking and advisory unit, we believe it’s a significant part of our business,”  Krupa told Financial News. “I’m not going to say we want to compete globally with bulge bracket US investment banks on M&A —that’s not what we’re trying to do. But within our own business mix, we see a lot of growth potential and it’s a real focus of ours.”

To contact the author of this story with feedback or news, email Paul Clarke

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