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Capital Markets

Societe Generale details equity derivatives cuts

SocGen appears willing to accept lower volumes as the price for avoiding losses of the kind it experienced in 2020.

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Societe Generale’s equity derivatives business is jettisoning multi-index and multi-asset class products, and shifting dividend-payment risks to the client, chief financial officer William Kadouch-Chassaing tells Euromoney.

The French lender has been among the worst-performing bank stocks this year, partly due to the erratic performance of its top-tier European equity derivatives franchise. Its equity market valuation is languishing at about 0.3x book value.

Equity derivatives losses, sparked by unexpected post-Covid cuts in corporate dividends – on top of credit impairments – pushed the corporate and investment-banking division and the group to a loss, back in the first quarter.

Kadouch-Chassaing says the bank has learnt its lessons.

“It does change the way we want to operate,” he says. “This business was more prone to shocks during market-dislocation events, as the products are very structured, and you can’t hedge them perfectly.

“We have reduced our risk appetite. We want to be better able to hedge our risks and be less affected by market dislocation.”

Troubles

Outside of equity derivatives, earlier cuts and a more parsimonious use of its balance sheet – especially compared with BNP Paribas – have seen SocGen miss the fixed-income trading bonanza other investment banks enjoyed in 2020.

Meanwhile,


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