The CEO of Société Générale's Corporate & Investment Banking has revamped the management and organisational structure of the bank to break down silos between business lines and build out its advisory business.

In May 2008, Michel Péretié had the tricky task of taking on the role of CEO of Société Générale Corporate & Investment Banking (CIB) just four months after the bank reported a €4.9bn trading loss, which ultimately forced his predecessor to step aside. At the same time, the industry was beginning to realise the magnitude of the financial crisis that was emerging. Mr Péretié joined from Bear Stearns - where he had been CEO of its European and Asia businesses - which had been acquired at a knock-down price by JPMorgan to prevent it going into liquidation.

Internally, Mr Péretié had big shoes to fill. His predecessor, Jean-Pierre Mustier, had been hugely popular. As CEO he had defined the investment bank and its culture, and before the activities of rogue trader Jerome Kerviel revealed the bank's risk management shortcomings, had been lauded as one of the European financial industry's best managers and heir apparent to then group chief executive Daniel Bouton.

The bank took immediate and decisive action to strengthen risk management and to recapitalise the bank, so Mr Péretié did not inherit a platform in the midst of a tailspin. Moreover, Mr Mustier worked in parallel with Mr Péretié until the third quarter of last year (when he moved over to head the asset management division) which smoothed the handover and kept its most senior bankers onside.

Fresh approach

Mr Péretié began his sole tenure by announcing a new management team in February, which streamlined the core executive committee to include just four senior managers, alongside him: Thierry Aulagnon, head of the coverage and investment banking division; Christophe Mianné, head of the global markets division; Jean-Luc Parer, head of the global finance business; and Slawomir Krupa, head of strategy and corporate development as well as central and eastern Europe, the Middle East and Africa.

"We decided that the core executive committee should be a smaller group of people, each in charge of a business division and intimately involved with the strategy of the corporate and investment bank, who could make quick decisions about the day-to-day running of the business together with the newly appointed chief operating officer, Christophe Hioco," says Mr Péretié.

In July, the management revamp was followed by a new organisational structure under the bank's 'Evolution' programme to optimise its business model. The name may be a little fanciful, but the idea is straightforward - to regroup the solutions and services offered by the bank around three areas of expertise: client coverage and investment banking under Mr Aulagnon; global finance - including debt and equity capital raising, structured financing and hedging solutions - under Mr Parer; and global markets - flow fixed-income and currencies, flow equity, and commodities - under Mr Mianné. Some of the strategy - including the combination of fixed-income and equity divisions - is not new, but the implementation of a plan that was delayed by the Kerviel strategy.

Olivier Khayat, who as the previous head of the fixed-income, currencies and commodities division undertook a complete overhaul of the division following his appointment in January 2008, appeared to lose out following the promotion of Mr Mianné to run a combined global markets business. When the bank announced the new management team, it stated that Mr Khayat would take up a new role within the group. While there has still been no news about his appointment, SocGen says that this is still the plan.

This regrouping is designed to achieve one of Mr Péretié's key challenges: to break down silos between business lines and increase SocGen's share of the advisory business.

This is a sensible goal, although easier to outline than to achieve. It is more difficult still when rivals such as Barclays Capital and Nomura are also building out advisory businesses. In the first nine months of this year, SocGen was seventh overall in Europe, the Middle East and Africa debt capital markets and second in corporate euro issuance for the first time; in European mergers and acquisitions (M&A), however, the bank rarely reaches the top 10 in the advisory league tables. Even in France it trails in eighth position, according to data firm Dealogic, while French rival BNP Paribas comfortably leads the country's rankings.

Historically, SocGen has focused its advisory capabilities on deals with a French component because that was where Mr Mustier thought the bank had the most to offer. Mr Péretié believes that the bank should broaden its offering to all of its global clients, particularly as the crisis has prompted a consolidation of banking relationships.

"Reinforcing investment banking is very important; it was not embedded in our DNA. We have a strong position in debt capital markets and an improving one in equity capital markets; in secured lending we are one of the best. But we have not capitalised enough on our client relations. We were very silo-driven. The new structure will breakdown those silos," says Mr Péretié.

By streamlining the business lines and creating "bridges between the businesses" through an enlarged executive committee (made up of business heads and their senior managers), Mr Péretié hopes to strengthen the investment banking culture and leverage the strong client relations it has in its debt and equity franchises.

New recruits

Central to Mr Péretié's vision is the recruitment of 30 to 40 investment bankers outside of France, of which four M&A bankers have been hired so far and seven more hires are close to being finalised. It is a slow process, says Mr Péretié, not least because each has to be agreed by all of the business heads. "It is a collective investment, so we wanted full alignment with all the business lines."

He says now is a good time for the bank to invest in the corporate finance platform, especially for a bank with balance sheet. "Before the crisis, there was an excess of liquidity; now, with liquidity more scarce, the combination of our balance sheet with our products and advisory offers a much more powerful client proposition and gives us a good opportunity to grow that side of the business."

Currently, capital markets represent about 75% of CIB revenues, with 25% coming from financing and advisory. Mr Péretié is hoping to rebalance that split so that markets accounts for about 60% to 65% and financing and advisory is brought up to 35% to 40%.

How much that ratio changes depends on whether the bank will expand the balance sheet for financing. "Our [share of the] balance sheet is sufficient at the moment to compete quite aggressively. But if I look at some competitors they are operating with more, but we are more efficient," says Mr Péretié.

And now is a good time to make the case for more balance sheet. "We have huge client interest [in our balance sheet] and risk and liquidity are being properly rewarded," says Mr Péretié.

The new structure is already paying off, he adds. "In equities and fixed-income, we had close to our best performance ever in Q2. In four months, we have achieved in our bond business what we did in the whole of last year. We are the fastest-growing firm in European fixed-income. Origination is also extremely busy and we are gaining a lot of market share. In financing, the bank had its best performance ever in Q2."

Unsurprisingly, risk management is still high on the bank's management agenda. A remedial programme was put in place immediately after the Kerviel affair, before Mr Péretié arrived, but the new business structure aims to improve risk management as much as to increase SocGen's share of the investment banking wallet.

Although the bank had already done a great deal to redraw risk management practices, Mr Péretié says that combining equity and fixed-income capital markets (including the currencies and commodities business) under Mr Mianné, and all capital raising under Mr Parer, will also enable the bank to harmonise two very different risk management cultures under a single head of trading and risk management, Dan Fields, CIB's global head of trading.

"Now all the businesses will be operating with similar templates and risk indicators, and similar types of limits," says Mr Péretié. "This reduces risk and makes for a very efficient use of capital."

Mr Péretié is not pessimistic about the business environment, going forward - "It is a big mistake to be pessimistic because then you are likely to miss opportunities," he says - but he does not underestimate the challenges ahead. Aside from the uncertainty about how robust the market recovery is, he says the shape of future regulation could have a serious impact on banks' business models. For example, taxing trading operations through increased capital charges could affect how much liquidity banks provide for investors and for client trading activities, and push up financing and hedging costs.

Competitive distortions are everywhere, he warns. "The fact that each geography is working under a different regulatory and accounting system is having a significant impact on competition," he says. This is particularly true when it comes to looking at bank leverage, he adds. "For example, because netting rules are different in the US and Europe, US banks look less leveraged than European banks. We need to ensure that the rules create a level playing field for all."

Career history

2008 - appointed CEO of Société Générale Corporate & Investment Banking.

2007 - appointed to the board of Bear Stearns & Co.

2006 - appointed CEO of Bear Stearns for Europe and Asia.

2004 - promoted to chairman of Bear Stearns International.

2000 - joined Bear Stearns as head of fixed-income and derivatives for Europe and Asia.

1999 - promoted to global head of fixed-income of the newly formed BNP Paribas.

1996 - appointed global head of equity derivatives, swaps, credit derivatives and foreign exchange at Banque Paribas.

1992 - moved to Japan as head of capital markets, Paribas Japan.

1984 - created Banque Paribas' derivatives group.

1983 - moved to the Treasury department.

1980 - joined Banque Paribas in the inspectorate.

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