Private Banking Revenues At SocGen Rise; Parent Suffers Russian Chill

Tom Burroughes

8 May 2014

Paris-listed in Singapore this year, announced a 5 per cent year-on-year rise in revenues in this segment to €207 million ($288 million).

Gross margin on private banking stood at 107 basis points, it said. At the end of March, the private bank held €114 billion of assets under management, buoyed by a first-quarter inflow of €1.2 billion, particularly in France and the UK.

The bank, which on 4 May marked its 150th anniversary, yesterday reported the figures while for the banking group as a whole it logged a €525 million write-down connected to activities in Russia, highlighting how economic and financial developments in the country, amid its escalating confrontation with Ukraine this year, has affected business.

The banking group’s net banking income, when restated for non-economic items (revaluation of own financial liabilities and debt value adjustment), amounted to €5.829 trillion, up 3.3 per cent from the first quarter of a year ago. Operating income (excluding the revaluation of own financial liabilities and debt value adjustment) rose to €1.287 billion versus €745 million in Q1 2013.

The bank insisted that despite current tensions, Russia represents a valuable market and had no plans to withdraw. It added that it has no material exposure to Ukraine. “Q1 2014 was marked by the emergence of the crisis in Ukraine, with repercussions on the Russian economy, which experienced a sharp slowdown. The Group confirmed its long-term view of the potential of the Russian banking market and its commitment, with the purchase of minority interests amounting to 7 per cent of Rosbank’s capital on April 11th, 2014,” it said.

“At the same time, the decline in the rouble, growing uncertainty concerning the environment and delayed performances prompted the group to write down goodwill on Russian activities, with a negative impact of -€525 million on Q1 14 group net income,” it continued. SocGen said that on 13 May it will lay out its three-year development strategy for Russia, with the aim of reaching “satisfactory profitability” in 2016 in a scenario of gradually easing tensions. Russia represents 3 per cent of SocGen’s global exposure.

Private bank AuM
The bank said a review of rules for the classification of assets under management resulted in the reclassification of €7.4 billion of these assets in the “assets under administration” category. After the launch of the new private banking model in France – as previously reported by this publication - €35 billion were included in private banking’s assets under management.

In the transaction with DBS Group over its Asia private bank, SocGen signed a sale agreement over a bank representing $12.6 billion of assets under management at end-December 2013.