Société Générale’s announcement last month of a profit warning for its fourth-quarter results was an embarrassment for its senior management, coming just a couple of months after chief executive Frédéric Oudéa said the French bank was well positioned after its recapitalization to build on the recovery in financial markets.
The nature of the bank’s announcement on January 13 – that it would take an expected write-down of €1.4 billion of risky assets, mostly from exposure to CDOs of residential mortgage-backed securities – was a stark reminder to investors that SocGen was one of the European banks with the largest exposure to the US sub-prime crisis. The bank has a remaining portfolio of structured credit assets totalling about €23 billion.
Analysts are also expecting relatively weak results in SocGen’s fixed-income division but the bank said it still expected to post a "slight profit" for the quarter as a whole.
Repositioned
However Michel Péretié, the head of SocGen’s corporate and investment bank, is determined that such news will not derail the implementation of its strategy, codenamed Evolution, designed to reposition the firm’s offering to take into account the new, post-crash environment.
The strategy, which went live in July last year, is intended to streamline SocGen’s CIB operations into three clear areas of expertise: coverage and investment banking, headed by Thierry Aulagnon; global finance, led by Jean-Luc Parer; and global markets, run by long-time equity derivatives head Christophe Mianné.