Christophe Mianné, the new deputy of Société Générale’s corporate and investment banking operation, is targeting a change in mindset as much as a change in structure.

It would be fair to say that the appointment of Didier Valet as chief executive of Société Générale Corporate and Investment Bank (SG CIB) after the departure of Michel Peretie in December 2011 was a sign of the times. Mr Valet was previously chief financial officer (CFO), and there is no question that balance sheet management is increasingly central to the strategy of every investment bank.

But even the leanest balance sheet cannot generate a return without attention to the bank’s strongest business lines. For that, Mr Valet will be ably assisted by Christophe Mianné, promoted to deputy chief executive of the CIB after the CFO’s elevation. Mr Mianné was a key architect of the bank’s core global markets franchise, and in particular its pioneering equity derivatives division that remains the largest in Europe, and the bank’s leading revenue generator by far.

The pressure on French banks is arguably greater precisely because they survived the first round of the financial crisis in 2008 in better shape, and therefore faced less imperative to deleverage than US or UK rivals. Until 2011, that is. The onset of the eurozone sovereign crisis provoked severe funding stress, and even a putative speculative attack on French banks mid-year. That experience has prompted an accelerated strategic reappraisal that will bring SG CIB closer into line with the existing Anglo-Saxon banking model.

“What we are implementing is not a revolution, it is an evolution to the originate-to-distribute model in response to the new regulatory framework,” says Mr Mianné.


However, Mr Mianné does not seek to downplay the scale of the transformation, especially the consequences of dollar-based investors turning away from eurozone banks. SG CIB is adapting the way it works across some business lines that required dollar or very long-dated funding, in particular commercial real estate lending, shipping and aircraft finance, where the bank intends to focus more on advisory or distribution-led services for clients.

He emphasises that this strategic shift does not mean an indiscriminate withdrawal from all dollar or balance sheet heavy businesses, and the bank has maintained a constant dialogue with clients to demonstrate to them that it is ready to invest further in its core activities.

“We have made a choice to scale back on certain activities precisely because we wanted to focus on certain other areas, for instance the commodities finance sector where we feel we have a competitive advantage. In fact, we have deleveraged not just long-term dollar use, but generally across both market and credit risk during 2011. So we have been able to say to teams that we have room for increased credit production across all currencies to the end of the year, and most likely that will be 50:50 dollars to euros,” he says.

Although the improvement in funding conditions created by the European Central Bank’s Long-Term Refinancing Operation (LTRO) has largely dissipated, Mr Mianné says dollar-lending is not an issue today for the bank, as its financing plan is largely complete for 2012. The bank issued unsecured bonds and its market-leading structured products franchise issued about EUR3bn in notes during the first four months of the year, at least some of it in dollars, with part of the inflows providing funding for the bank. Euro swaps can also boost the bank’s dollar inventory if need be, says Mr Mianné.

Beyond the funding situation, Basel III is a further trigger for adapting the bank’s model. While the full provisions are not due to come into force until the start of 2019, Mr Mianné points out that both financing and swaps transactions that run for more than five years are already considered as if under Basel III rules before signing.

What we are implementing is not a revolution, it is an evolution to the originate-to-distribute model

Christophe Mianné

“We are less impacted since we are stronger on the equity side, which will be less penalised by Basel III, and well-collateralised structured financing is not too capital-intensive either so there are some good deals to be done. But we know that very long-term swaps will be heavily penalised and the capital cost of counterparty risk will increase significantly. It will also be harder to meet return-on-equity targets in flow fixed income unless markets reprice further, but we are small in this segment anyway,” he says.

Seeking fees

Even those core areas on which the bank is focusing resources will need to change. The advisory side of the business, which can generate revenues without expending balance sheet, has historically been the smaller cousin of SG CIB’s global markets activities. One equity analyst estimates the total investment banking revenues for 2011 at not much more than 15% of the revenues from equity derivatives alone.

The bank had already initiated a new structure and a push to enhance advisory fee generation in 2008, and Mr Mianné says the next step is for every part of the bank to increase its attention on this.

“Advisory cannot be just about mergers and acquisitions, and we are improving our advisory offering outside of France, even in areas that were traditionally led by big-ticket balance sheet lending such as commodities finance,” he says. He also points to the broadening role of the bank’s asset management subsidiary, Lyxor, which won an advisory mandate for one of the largest US public pension schemes even though the scheme was not invested in any Lyxor funds.

In a tough merger and acquisition environment, there have been signs of progress on deal flow outside France in 2012, including a sell-side advisory role on the sale of the Motel 6 chain in the US to Blackstone (the seller was French hotel chain Accor), and a financial advisor mandate for German healthcare company Fresenius on its purchase of private hospital chain Rhoen Klinikum. The bank’s debt capital markets team also enjoyed a strong first quarter, gaining market share and benefiting from the shift among European high-yield borrowers to access the bond market instead of leveraged loans.

Navigating a shrinking market

Inevitably, the strategic realignment involves staff cuts, and not just in the units deemed non-core. The bank has launched and almost achieved a headcount reduction plan of 1580 worldwide, about 14% of total staff. Société Générale neither confirmed nor denied an article in a French newspaper in April 2012 that a voluntary redundancy plan for 880 staff in France had received more than 2000 applications.

There have been a number of high-profile departures from the bank this year, including the former co-deputy head of global markets Sofiene Haj-Taieb, former global co-head of cross-asset solutions Arnaud Sarfati and both the former co-heads of fixed income and currencies in the markets division. This is a tough cultural change for French banks, which tend to be characterised by relative staff stability compared with their Anglo-Saxon peers, and many of the senior staff who have left had worked at the bank since graduating from university.

However, Mr Mianné prefers to focus on some new appointments that he is clearly pleased with. These include the promotion of his long-standing colleague and head of trading Dan Fields into Mr Mianné’s previous role as head of global markets, and the appointment of head of treasury and repo Danielle Sindzingre to lead a division that combines her existing team with the fixed income and currencies team.

“This has created a much stronger offering running right through credit, rates and foreign exchange, and it has already begun to pay off in the first quarter,” he says.

Of course, SG CIB is far from the only eurozone bank that is reconsidering its business model. Its position in France is strengthened by some competitors pulling out of SG CIB’s own core markets – Natixis is shutting its commodities division, while Crédit Agricole pulled out of equity derivatives (except for strategic corporate transactions) at the end of 2011. And outside of France, UniCredit has been heavily scaling back its equities business.

Mr Mianné says SG CIB will certainly not limit itself to its home market of Europe, but will continue to focus on its strengths in the US and Asian markets, especially equity derivatives and natural resources.

“We are almost done in terms of adapting our costs. The adaptation to Basel III will take longer, perhaps to the end of 2013. [Société Générale chief executive] Frederic Oudéa has talked about the banking sector earning 10% to 12% return on equity over the next two years, and that seems feasible for us based on our current product lines,” says Mr Mianné.


All fields are mandatory

The Banker is a service from the Financial Times. The Financial Times Ltd takes your privacy seriously.

Choose how you want us to contact you.

Invites and Offers from The Banker

Receive exclusive personalised event invitations, carefully curated offers and promotions from The Banker

For more information about how we use your data, please refer to our privacy and cookie policies.

Terms and conditions

Top 1000 2023

Request a demonstration to The Banker Database

Join our community

The Banker on Twitter