BNP Paribas has confirmed that it is considering a bid for Soci?t? G?n?rale, France’s second largest bank that is reeling from a €5 billion trading scandal.
A spokeswomen for BNP Paribas said that the country’s largest bank was examining whether to press ahead with a deal, saying: “We are studying it because all of Europe’s banks are studying it.”
The indication of a bid sent SocGen’s shares up about 1.7 per cent, to close at €83.20, giving it a market value of about €38 billion, or about two thirds that of BNP, whose stock closed down at €65.83. That was way off SocGen’s €73 billion peak valuation in May prior to the onset of the credit crunch.
A takeover approach would be BNP’s second move on SocGen after a failed bid attempt in 1999. However, SocGen is now seen as vulnerable after the disclosure of €4.9 billion of losses notched up by a single rogue trader, J?rôme Kerviel.
One source close to the matter said yesterday: “This time round they [BNP] could do it on their own terms, the French state would be happy and they would get to keep out any foreign bidders.”
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Takeover talk swirled yesterday as police raided a Paris flat to seize a computer owned by Mr Kerviel and as a series of investigations into the scandal got under way.
Any deal would see BNP take SocGen’s retail banking arm in France, giving the enlarged BNP 20per cent of the market. It would also be likely to keep hold of SocGen’s asset management and private banking business but would have to divest its rival’s derivatives business, the world’s largest. BNP has the world’s second biggest derivatives trading business.
Sources yesterday suggested that BNP would buy the whole of SocGen but look to conduct a side-sale of the derivatives business, mostly likely to Credit Agricole, the French bank with a 30 per cent share of the retail banking sector.
Any tie up would create huge synergies, with one source last night indicating as much as €1 billion in cost savings from bringing together France’s two top banks. But it would also lead to hundreds, or even thousands, of job losses, which would create havoc with the unions and a major headache for President Sarkozy.
But a deal between BNP and SocGen could also create big problems in Brussels after the EU Internal Market Commissioner, Charlie McCreevy, warned France earlier this week that competition rules would apply to the treatment of any bidders.
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“In a situation of potential takeover, free movement of capital rules provide for undiscriminatory treatment of potential bidders,” Mr McCreevy said.
City sources said yesterday that a number of foreign banks that have not been hit by the sub-prime crisis, have no exposure to wholesale markets and no large investment banking operations, could decide to pounce on SocGen.
In Europe, that includes Santander and BBVA of Spain, UniCredit and Intesa of Italy and HSBC and Lloyds TSB in the UK.
Sources close to UniCredit and Santander have said they were not interested although bankers point out the foreign banks would first wait to see what BNP does before making any move of their own.
Still, a takeover of SocGen is not necessarily on the cards after the bank’s board earlier this week “renewed” its confidence in Daniel Bouton, its chairman and chief executive, for a second time in the face of political pressure for him to step down.
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Christine Lagarde, the French Finance Minister, and President Sarkozy have called for a change at the top of the bank but the board has stood firm, after last week refusing Mr Bouton’s resignation when the scandal broke.
Generale information
€38bn The closing market value of SocGen yesterday
€73bn Estimates for the value of SocGen in May prior to the credit crunch
€60.5bn The closing market value of BNP Paribas