Many banks are reluctant to spell out how they make money in derivatives but SG’s black box is even blacker than most. “It’s very difficult for us to understand where it gets its money from,” admits Eric Hazart, an analyst at Exane in Paris.
It’s clear, though, that SG makes a lot of its money from equity derivatives. Analysts estimate that this counts for between 70% and 80% of the equity and advisory division’s income. According to a source who knows the business well, at the peak of its profitability in 2000 equity derivatives was responsible for 32% of the net profits of Société Générale worldwide.
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