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The crisis of identity at Société Générale

French bank Société Générale needs to take over a rival - or be taken over - if it is to fulfil its promise in the nascent pan-European market. Crucially, it also needs to overhaul and redirect its investment banking business.

THE CLOCK IS ticking for Société Générale chairman Daniel Bouton. Since failing to buy Paribas in 1999, when BNP's Michel Pébéreau broke up a friendly merger and snatched the prize from him, Société Générale has not made a significant acquisition.

Four years on, his bank faces the same identity crisis it did then. It is big enough to be important and to count among the core banking group of major European companies but not of the size to play with the big boys such as Deutsche Bank and UBS Warburg.

Bouton has only two options: eat or be eaten.

Until recently, a merger between the two leading French banks looked like a fait accompli. "Everyone knows that the best match for Société Générale is BNP Paribas," says a Paris-based financial institutions banker. "Their businesses slot together perfectly." Société Générale's strengths in retail banking and asset management fit well with its rival's in securities services and specialized financial services. BNP Paribas has a retail hub on the west coast of America, Société Générale chose central and eastern Europe.

But a hostile bid by BNP Paribas for Société Générale - given their relative sizes that is how a deal would be structured - would trigger a long and bloody battle.

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