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Investment Banking: Pardon my French

Jean-Pierre Mustier wants to make Société Générale a global powerhouse--and win the respect of investment banking rivals in London and New York -- by building on the bank's dominant position in equity derivatives.

This article appears courtesy of Institutional Investor

By David Lanchner

Jean-Pierre Mustier has racked up a pretty impressive performance. In just three years the head of corporate and investment banking at Société Générale has extended his bank's worldwide lead in the complex and rapidly changing market for equity derivatives and developed powerful franchises in structured finance, euro-denominated bond underwriting and project finance. And all this while attaining a level of profitability unmatched by any of its European rivals: a stunning 44.4 percent aftertax return on equity last year.

But for all these successes, Mustier is more frustrated than satisfied. Most equity analysts value his operation at a multiple of eight times estimated earnings in determining price targets for Société Générale, reflecting concerns about the sustainability of profits. Wall Street rivals Merrill Lynch & Co., Morgan Stanley and Goldman Sachs Group were trading at multiples of 12, 11 and 10.5 times forecast 2007 earnings, respectively, late last month. Why the discrepancy? Ask Mustier and he has a ready answer: cultural prejudice.

"Because capital markets evolved more rapidly in the U.S. and the U.K. than they did in continental Europe, investment banks are judged through an Anglo-Saxon filter," he contends.

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