The foundations for the success of the Societe Generale group in Luxembourg have been built on its multi-specialist credentials. In private banking, however, where it now focuses mainly on ultra-high net worth individuals (UHNWI), Societe Generale’s Luxembourg operation has focused principally on servicing its West European client base.
|Jeanne Duvoux, |
head of Societe Generale
Private Banking (SGPB)
The bank is now committed to leveraging the expertise and infrastructure it has built up in Luxembourg to reach a broader range of HNWI clients. “Today, our strategy is to export our successful Luxembourg model to other nationalities in the Eurozone,” explains Jeanne Duvoux, head of Societe Generale Private Banking (SGPB) in Luxembourg. “It is clear to us that our domestic market is not just Luxembourg. It is Europe.”
This process gathered momentum in 2017 with the opening of a representative office in Milan. As Duvoux explains, Italy was an obvious market for SGPB to begin testing its model across a more diversified range of clients, given the depth of Italian high net worth savings and the fragility of the local banking sector. “The experience in Italy has been good,” she adds. “Clients there are very keen to ensure that they spread their risk, which is why they have been attracted by our model.”
Open for business in Frankfurt
Buoyed by its success in Italy, SGPB has recently opened a representative office in Frankfurt. Again, there were several compelling reasons why it was natural for the private bank to turn its attention to Germany, where Societe Generale itself has had a presence since 1886. The most obvious of these is that, as the largest economy in the EU, Germany is a market that no private bank with pan-European ambitions can afford to overlook.
Additionally, expanding its franchise in Germany dovetails with Societe Generale’s strategy of developing its private banking business in markets where it has built a notable track record in commercial and investment banking. This is an area in which Societe Generale is now a recognized leader in Germany, and its commitment to the market was underscored last year when it announced the acquisition of Commerzbank’s highly regarded Equity Markets and Commodities (EMC) business.
The Luxembourg ‘toolkit’
The private banking business model under development in Frankfurt will be similar to the successful blueprint that SGPB has established in Milan. This is based on the representative office identifying and originating business in the local market, which is then referred to the Luxembourg office. This acts as the hub or nerve centre of the private bank’s broader European operations, providing clients with what SGPB describes as the Luxembourg “toolkit”, offering the expertise of wealth planning vehicles across all regulatory profiles and risk appetites.
This is in turn supported by a dense network of long-established local law firms, auditors, securities services specialists and depository banks. It is this ecosystem, says Duvoux, which gives clients access to the guiding principles which have underpinned the growth of Societe Generale’s private wealth management operation for several decades.
For Societe Generale itself, one of the chief attractions of this business model is that the availability of a well-established infrastructure in Luxembourg keeps costs to a minimum. This is an important consideration in a highly competitive market in which compliance costs and other regulatory requirements are a constant source of pressure on margins and break-even levels.
As Duvoux is eager to emphasize, however, it would be a mistake to assume that the private banking franchise in Germany can be built by simply cutting and pasting the formula that has been applied elsewhere in Europe. In part, this is because the client base in Germany, much of which is concentrated among entrepreneurs in the Mittelstand (SME) sector, has different investment requirements and risk tolerance levels.
A different perspective
Duvoux explains that, in Germany, SGPB adapts its local strategy, basing it on two key strengths. The first, she says, is the bank’s demonstrable cross-border expertise and its ability to offer multi-jurisdictional wealth planning. For example, the private bank’s financing services are at the disposal of clients in Germany looking to acquire real estate in a range of other countries – most obviously in France.
A second notable pillar of SGPB’s strategy in Germany is the diversification of the approach to wealth management that the French bank offers. “It is important to emphasize that we don’t compete with the local banks,” says Duvoux. “Instead, we complement them by offering clients a fresh perspective on wealth planning and structuring as well as on wealth management.”
One example of the differentiated menu of products SGPB brings to the table could be the investment environment, such as international equities, both in public and private markets. Another is the bank’s proven expertise in derivatives. A third is the exposure to alternatives and exchange-traded funds (ETFs) offered by Lyxor, 100%-owned by Societe Generale.
Innovation is at the heart of SGPB DNA, able to set up sophisticated solutions adapted to clients’ changing needs over the long term. SGPB’s ambition is to preserve and enhance the purchasing power of its clients’ wealth, guided by the principles to avoid large losses, mitigate volatility and enhance the visibility of returns for clients.
Duvoux is confident that by providing German private clients with access to this highly diversified toolkit, within a framework that is wholly transparent to the tax authorities, SGPB will rapidly win the trust of a fast-expanding client base. This will allow it to upgrade its German presence to branch status, in turn supporting the expansion of a local sales team operating nationwide – a model that SGPB is also rolling out elsewhere in Europe.