SG sets about targeted expansion

IFR 2068 31 January 2015 to 6 February 2015
7 min read
EMEA

HAS SOMEONE put something zippy into the water leading to those funky SG towers in La Defense? I only ask because the bank seems to have adopted a bit of a spring in its step over the past few months. I got some early intel this week on some senior executive changes stemming from the impending retirement of global head of coverage and investment banking Thierry Aulagnon, but it goes way beyond this.

The bank has been visibly accelerating changes to its business line; adding a fair few senior bankers across a host of businesses around the world to leverage the increased capital firepower being allocated to core products and geographies. SG gives the appearance of being a bank on a mission. In 2014, it finalised the buyout of Credit Agricole’s stake to become sole owner of leading derivatives broker Newedge, upped its stake in online bank and broker Boursorama, and announced plans to increase AUM at asset manager Lyxor by 50% by the end of 2018.

In the realm of banking statesmanship, chief executive Frederic Oudea was appointed to the presidency of the European Banking Federation on January 1, while head of regulatory strategy Eric Litvack took up the chairmanship of the International Swaps and Derivatives Association on the same day. Industry roles like these do add stature so I’m happy to include them in my SG thesis. Oudea is, of course, also relinquishing his chairmanship to former ECB man Lorenzo Bini-Smaghi. Not only is this good governance; Bini-Smaghi is clearly also a good catch for a bank for which Europe is the anchor and focal point for many of its businesses.

Didier Valet, ExCom member responsible for corporate and investment banking, private banking, asset management and securities services, told IFR at the end of Q3 last year that the bank was done with crisis-induced deleveraging and would over time be targeting a €12bn-plus increase in RWA across core business lines in its financial and advisory platform in order to add some oomph to earnings firepower.

The bank seems to have adopted a bit of a spring in its step over the past few months

WITHIN CIB, EXPANSION will come in the US, in emerging markets as well as more established areas. In the US, senior management ranks have been strengthened in recent months by some new faces: Guido Van Hauwermeiren jumped from BNP Paribas to be head of client coverage and deputy head of head of global finance and investment banking for the Americas, while Brian Thom left FBR to be head of corporate finance for the Americas. In DCM, growth in China, India and ASEAN are on the radar: recent hires include Raj Malhotra from Nomura as head of SEA/India DCM and Andy Liu from ICBC as head of China DCM.

In capital markets, structured finance, infrastructure and natural resources generated €1.8bn in revenues in 2013, and Valet wants to have increased that by a third by next year.

In terms of putting some specifics around expansion, a few developments have caught my eye. SG just hired an 11-man US commercial mortgage team from RBS. What’s important about that was it signalled the bank’s return to a business it quit at the time of the global financial crisis, no doubt attracted back into it by a massive wall of conduit CMBS loan maturities.

SG is also giving some focus to the active Australian infrastructure market and is hiring ahead of a debt binge that is expected to emerge to finance A$80bn in government asset sales over the next couple of years. I sense a theme here …

Closer to home, SG is embarking on a major push into Germany. I was slightly blown away to read that the French bank already has 3,100 employees in Germany across the group. It’s targeting growth of 5%–10% per year in Germany in coming years. Pretty impressive.

Former country CIB head Guido Zoeller was given an expanded group-wide role at the beginning of last year to co-ordinate the build-out and pull all of its strands together. To help the build, Dieter Veit just jumped ship from Rothschild to be co-head of corporate finance and head of M&A while SG said it was launching midcap research; strengthening equity advisory activities (Kirsten Kistermann-Christophe is joining from BofA Merrill to run equity advisory); initiating coverage in new sectors such as chemicals and real estate (Sascha Bock joined from Morgan Stanley to run real estate corporate finance) and expanding securities services.

AS FOR THOSE changes I reference at the top created by Thierry Aulagnon’s retirement, current global head of corporate finance Thierry d’Argent is stepping up to share Aulagnon’s role with former deputy group chief risk officer Sylvie Remond. Remond has pulled a switcheroo with Aulagnon’s former deputy Diony Lebot, who’s moved to the risk office as deputy to CRO Benoit Ottenwaelter. Meanwhile power and utilities M&A banker Sylvain Megarbane gets a big nod and will become global head of M&A as well as global head of corporate finance, replacing d’Argent.

Global markets, one of the other pillars of SG’s investment bank platform, is also undergoing some tweaking, I’m told. Global head Dan Fields is looking to achieve better alignment between sales and trading but it’s not clear yet – well to me at any rate – if that’ll involve any job changes. One to watch.

On a final note, I see SG has signed a lease on eight floors of office space in a new building in London’s Canary Wharf that will enable the bank to co-locate everyone from current locations in Tower Hill and Exchange House and Newedge’s office in Bishops Square into a single building when it’s completed in 2019.

I understand the bank was also looking at Spitalfields on the edge of the City of London, a stone’s throw from the uber-hip boho-chic Shoreditch. But they chose Canary Wharf instead, which only goes to prove that just because you’re on the up and up doesn’t mean you’re cool …

Keith Mullin