Societe Generale SA is exploring strategic options for its asset custodian unit, including a sale, as part a plan to boost its valuation by getting rid of poorly performing businesses.
The Paris-based bank is working with Citigroup Inc. on a potential deal for Societe Generale Securities Services, also known as SGSS, people familiar with the plan said, asking not to be identified discussing private matters. The unit could be valued at more than €1 billion ($1.1 billion), one of the people said.
The bank hasn’t taken a final decision and there’s no certainty the deliberations will result in a sale, the people said.
Spokespeople for Citi and SocGen declined to comment.
Chief Executive Officer Slawomir Krupa, the former top investment banker who took the helm at SocGen in May, is expected to unveil a new strategic plan next month. Chairman Lorenzo Bini Smaghi has made it clear that he wants Krupa to focus on efficiency and help boost the lackluster stock, which has been the worst performer among the largest French banks since the financial crisis.
In an earnings call this week, Krupa signaled that he is likely to shrink or even dispose of some activities as part of his revamp, saying the bank’s business lines must “make sense from the perspective of long-term value creation.” He had earlier pledged to better allocate capital as well.
In recent months, SocGen has reached agreements to sell four of its units in Africa, putting a fifth one under review.
Read more: SocGen CEO Krupa Hints He May Shrink Some Businesses in Revamp
Firms providing securities services play an important regulatory role in the investment industry, helping keep assets safe for financial institutions’ clients for a fee in return. State Street Corp. and Bank of New York Mellon Corp. are among the biggest players in this space.
In the second quarter, SGSS saw its revenue slump 21% to €179 million, falling short of analyst estimates. The unit, which had €4.7 trillion in assets under custody and €587 billion in assets under administration as of end-June, is seen by SocGen’s management as subscale compared with competitors, one of the people said.
BNP Paribas Securities Services, for instance, had €12 trillion in assets under custody at the end of June.
The last large transaction in the space was the acquisition of Royal Bank of Canada’s European asset servicing operations by Credit Agricole SA-owned CACEIS. The unit had assets under custody of €4.3 trillion before the deal completion, which took place last month.
Author: Alexandre Rajbhandari, Jan-Henrik Förster and Steven Arons
