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Societe Generale poised for another Asian push

SOCIETE Generale has been stepping up its corporate and investment banking (CIB) and markets business and pouring resources into commodities trade finance where it has always been a big player.

But much of the activity had gone under the radar as the news in the past seven months centred on the sale by France's third-largest bank of its Asian private bank business.

DBS Group Holdings' last month announced that it had bought the Asian private banking business of Societe Generale for US$220 million.

Fresh from a major restructuring which simplified operations into three core businesses from five, the group is ready to increase its exposure to Asia, said Pascal Lambert, Societe Generale Singapore country officer and head of South-east Asia.

Increasing exposure to Asia is critical because a large part of its success is operating as a global bank, he said in a recent interview. "The mood again is very positive; appetite from Paris towards Asia is very positive," he said.

In February, Societe Generale said that it would return more cash to shareholders this year, after reporting 2013 net profit of 2.18 billion euros (S$3.77 billion), against 790 million euros a year earlier. With a core Tier 1 capital ratio of 10 per cent at end-December under tougher Basel III rules, the bank has transformed its balance sheet.

The Asian contribution to the group's CIB business is understood to be about 15-20 per cent.

In Asia, Societe Generale wants to go beyond transactional banking, to strengthen relationships with clients and is willing to commit more capital to lending, said Mr Lambert.

Following the 2011 European crisis, many European banks reduced their operations, so while Societe Generale did shrink its financing activities due to de-leveraging, its trade finance business did not suffer, he said.

"We are one of the top three houses for commodity trade finance, it didn't suffer from de-leveraging," said Mr Lambert.

Trade finance is basically short-term in nature, with loan maturities of six to 12 months and the bank was "always able to commit significant balance sheet to this", he said.

The bank focuses on commodities such as oil and gas, metals and coal.

"We never lost market share; we might have consolidated our market position," he said.

The bank increased its balance sheet by 10-20 per cent to support the trade finance business from last year, Mr Lambert noted.

Another core strength is in structured products and equity derivatives.

Last year, Societe Generale bought out Credit Agricole's 50 per cent stake in Newedge, their commonly owned joint-venture focused on derivatives brokerage, making it a wholly owned unit.

With 100 per cent owned Newedge, the bank can fully service institutional clients such as hedge funds. Newedge provides a wide range of trade and post trade services to institutional and corporate clients, in particular through execution and clearing services on listed options and futures contracts on fixed income, foreign exchange, equities and commodities and on over-the-counter markets.

The CIB team in Singapore employs about 200 people and this may grow to 220 in the next two years.

The commodity trade finance desk has about 20 staff and another 15 in commodity derivatives.

Mr Lambert, who was appointed to his current role in September 2012, said that the big push last year was in North Asia. But this year will see more attention on South-east Asia and China, and deeper involvement in fixed income and project financing.

"We believe South-east Asia is our big push this year," he said.

Societe Generale is a major project finance player on a global scale. In 2012, the bank acted as the mandated lead arranger for the integrated Ichthys LNG (liquefied natural gas) project in Australia, the largest energy project financing globally to date. The total debt is US$20 billion comprising of Export Credit Agency (ECA) direct loans, ECA covered loans, commercial bank uncovered and sponsor loans.

Last year, Societe Generale was the mandated lead arranger for the US$5 billion financing and construction of the Nghi Son Refinery & Petrochemical Refinery complex in Vietnam.