Analysis of the development strategy of Societe Generale in Europe

Résumé du document

In the area of financial services, achieving an integrated market for banks and financial conglomerates is a core component of the European policy. The banking market seems to remain mainly national, but the free movement of capital, the adoption of the euro and the progressive harmonization of rules impel banks to achieve a critical size not only in their domestic market but also at the European level. If this expected movement of consolidation was actually limited until 2003, the realization of major mergers and acquisitions since 2004, permitted by Europe's economic recovery, tends to prove that consolidation has now really begun. While some banks like BNP-Paribas decided to take up the challenge of achieving a European critical size, Société Générale, one of the oldest banks of France, still prefers standing alone, developing a strong organic growth and making only very targeted acquisitions. In this document, we will have a sneak peek into the banking consolidation in Europe. In the latter part, we will focus on the development strategy of Société Générale and in particular on the difference between its detail banking and financial services international strategies. Finally, we will conclude about the risk of Société Générale's "standing alone" strategy in the long run.

Extraits

[...] In October 2005, Société Générale acquired the third largest bank of Montenegro, Podgoricka Banka, whose market share is of CROATIA On April 2006, Société Générale announced it had signed a deal with Unicredit to buy of the Croatian Bank HVB Splitska Banka. It is the fourth detail bank of the country with of market share individual customers and 112 branches. The deal requires the agreement of the central Bank of Croatia. Société Générale intends to profit from strong synergies with its detail banking networks in Serbia, Montenegro and Slovenia. [...]

[...] No doubt that the firm's strategy of early investments in this country has been a true success. Bulgaria: SG Expressbank (1999) Société Générale is the fifth largest detail bank in Bulgaria. Like in Romania, Bulgaria will integrate the EU in 2007 or 2008. Greece: General Bank of Greece (bought in 2004) Serbia And Montenegro: SG Yugoslav Bank In Serbia, Société générale has first chosen to develop only by organic growth. The firm was present in the country since 1978 but had to close its activities. [...]

[...] However, a European consolidation seems to be indispensable in the context of globalization. The European banking industry is increasingly exposed to global trends. One of them is the increased competition from the American mega-banks (Citigroup, Bank of America-Fleet Boston and JP Morgan-Bank One) who compare favorably in terms of revenues and costs. The European banking market needs to be girded against them; otherwise there is a danger that the development seen in investment banking will be replicated in European retail banking. Why have we not seen more cross-border deals? [...]

[...] There are three main geographical areas of expansion: Central and Eastern Europe, the Mediterranean basin, Africa and the French overseas territories. In this paper, we focus on Société Générale's development in Central and Eastern Europe which represents 55% of Société Générale's international retail banking arm (in term of net banking income). According to a recent survey[1] of the European Financial Management & Marketing Association (EFMA), the East-European banking market is now profitable and has the best long-term growth prospects in Europe. [...]

[...] Analysis of the development strategy of Société Générale in Europe Achieving an integrated market for banks and financial conglomerates is a core component of the European policy in the area of financial services. Even if the banking market seems to remains mainly national, the free movement of capital, the adoption of the euro and the progressive harmonization of rules impel banks to achieve a critical size not only in their domestic market but also at the European level. If this expected movement of consolidation was actually limited until 2003, the realization of major M&As since 2004, permitted by Europe's economic recovery, tends to prove that consolidation has now really begun. [...]