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SocGen takeover: Will SCGLY’s ‘distressed valuation’ attract new suitors amid CEO Oudea succession search

14:00, 15 August 2022

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A image of Societe Generale headquarter in La Defense, Paris
SocGen's depleting market share has led to rumours of a takeover - Photo: Shutterstock

It was announced in May, that Société Générale's (SCGLY) CEO Frédéric Oudéa was to step down in 2023 after 14 years, sparking a succession battle at the French bank.

This was a move which surprised most of the financial world and has not only created management uncertainty and various internal disagreements, but has also raised the question as to whether the bank could see fresh interest in regards to a takeover?

"It is a decision I took with humility, lots of emotion but also with a serene mind," said Oudéa at Société Générale's Annual General meeting in May.

It’s been claimed that Oudéa’s determination in 2020 to keep the bank linked to its Russia subsidiary Rosbank, was what eventually forced him out and led him to resign this year.

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Société Générale's (SCGLY) share price chart

Cutting ties with Russia

SocGen (SCGLY) subsequently announced in April 2022, that it will cease its banking and insurance activities in Russia and announced the signing of a sale and purchase agreement to sell its entire stake in Rosbank and the Group’s Russian insurance subsidiaries to Interros Capital. 

“The impact of the disposal of Rosbank and the Group’s Russian insurance activities on the group's CET1 ratio is expected to be around 20 basis points based on the net value of the disposed assets as of December 31, 2021,”a SocGen statement said.

“It would mainly result from the impact of the write-off of the net book value of the disposed assets, largely offset by, on the one hand, the deconsolidation of the local exposure to Russia (~EUR 15.4 billion of exposure at default as of December 31, 2021 and on the other, a payment in favour of Société Générale including notably the repayment by the purchaser of the subordinated debt granted by Société Générale to its subsidiary.” 

As a result of SocGen's seperation from Russia and Oudéa's exit, Lorenzo Bini Smaghi, SocGen’s chair, is keen for the bank to have a fresh start and it is thought that the bank may look overseas for candidates to replace Oudéa when he leaves.

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Stock decline

But that’s not all.

Since Oudéa took over in 2008, SocGen (SCGLY) stock has plummeted 73%, with a market capitalisation of €19bn ($19.5bn), compared to BNP Paribas (BNP) market cap of €60bn.

Its depleting market share has led to rumours of a takeover, and it’s been linked with Italy’s, UniCredit (UCG), but its weakened valuation could attract new suiters.

BNP Paribas (BNP) share price chart

“The stakes are high for Oudéa’s successor. While recent results provide some cause for optimism, SocGen (SCGLY) continues to trade at a 'distressed valuation'”, said Bank of America analyst Tarik El Mejjad in an interview with the FT.

Upbeat results

However, despite the decline in its market cap, on Wednesday 3 August, SocGen (SCGLY) reported better-than-expected earnings, despite the bank losing €3.3bn after exiting from its Russian operations.

The bank saw every unit grow in its second quarter, which helped offset the impact of its departure from Russia.

“We combined, in the first half of 2022, strong growth in revenues and underlying profitability above 10% (ROTE) and we were able to manage our exit from the Russian activities without significant capital impact and without handicapping the Group’s strategic developments,” Oudéa said in a statement.

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