Achieving an integrated market for banks and financial conglomerates is a core component of the European policy in the area of financial services. Even if the banking market seems to remains mainly national, the free movement of capital, the adoption of the euro and the progressive harmonization of rules impel banks to achieve a critical size not only in their domestic market but also at the European level. If this expected movement of consolidation was actually limited until 2003, the realization of major M&As since 2004, permitted by Europe's economic recovery, tends to prove that consolidation has now really begun. While some banks like BNP-Paribas decided to take up the challenge of achieving a European critical size, Société Générale still prefers standing alone, developing a strong organic growth and making only very targeted acquisitions. After having analyzed the banking consolidation in Europe, we will focus on the development strategy of Société Générale and in particular on the difference between its detail banking and financial services international strategies. Finally, we will conclude about the risk of Société Générale's “standing alone” strategy in the long run.
[...] The development strategy of Société Générale in Europe After its failures to merge with CIC, BNP and finally Paribas in the late 1990's, Société Générale has adopted the strategy of standing alone since 2000. Instead of trying to achieve a critical size, the firm has preferred to focus on profitability. While its main French rivals, BNP- Paribas and CA, realized major M&As, Société Générale has chosen organic growth and smaller acquisitions in developing countries. It has targeted high-growth geographical regions and businesses. [...]
[...] An internal and external growth strategy supported by synergies within the Group, by a wider product offering and by the development of alternative distribution channels, has enabled Société Générale's international retail banking to continue expanding its business activities efficiently in this zone despite the entry of many Western European banks. It has 3,527,000 individual customers and 919 branches in seven Central and Eastern European states. Czech Republic: Komercni Banka (bought in 2001) Balance sheet (EUR 17,100 Mkt share loans (individuals) Mkt share deposits (ind.) Branches 364 With 1.5 million of individual customers, Société Générale is the second largest detail bank in Czech Republic which represents its first market outside of France. [...]
[...] One of them is the increased competition from the American mega-banks (Citigroup, Bank of America-Fleet Boston and JP Morgan-Bank One) who compare favorably in terms of revenues and costs. The European banking market needs to be girded against them; otherwise there is a danger that the development seen in investment banking will be replicated in European retail banking. Why have we not seen more cross-border deals? Indeed, except a few large M&As in 2005 and 2006, the majority of cross-border deals have been either very small or confined to geographical areas with strong historical and cultural links. [...]
[...] The main benefits of M&As are rather to be reaped in the form of asset size, increase in market shares, and diversification of revenues. Moreover, the existence of a large sector of non-commercial banks (like saving banks, mutual and cooperative banks) makes the banking consolidation more difficult because commercial banks are often forbidden to takeover non-commercial banks. It is often argued that the non-commercial banks distort competition by not having to pay for the cost of their capital and so that reduce the profitability of private commercial banks. [...]
[...] No doubt that the firm's strategy of early investments in this country has been a true success. Bulgaria: SG Expressbank (1999) Balance sheet (EUR 495 Mkt share loans (individuals) Mkt share deposits (ind.) Branches 104 Société Générale is the fifth largest detail bank in Bulgaria. Like in Romania, Bulgaria will integrate the EU in 2007 or 2008. Greece: General Bank of Greece (bought in 2004) Balance sheet (EUR 3,164 Mkt share loans (individuals) Mkt share deposits (ind.) Branches 121 Serbia And Montenegro: SG Yugoslav Bank Balance sheet (EUR 305 Mkt share loans (individuals) Mkt share deposits (ind.) Branches 51 In Serbia, Société générale has first chosen to develop only by organic growth. [...]
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