SG: global markets repositioning a priority for 2021

Société Générale posted revenues of €5.8 billion in the fourth quarter of 2020, up 1.6% from Q3, but a 2.3% decrease compared to the prior year quarter. 

The bank led by Frédéric Oudéa (pictured) reported a progressive recovery in structured products during the fourth quarter of 2020. Flow and hedging activities enjoyed strong volumes in Q4 and the Asia region performed well in all products.

Finalisation of the repositioning of the global markets business is a priority in 2021

The group’s structured products had been hit hard by the market dislocation in H1 2020, although losses were mitigated by the increased revenues for listed products and equity flow products. Revenues rebounded in H2, in a normalising market environment. The integration of Commerzbank’s equity markets and commodities (EMC) activities was finalised in Q1 20.

In 2020, a strategic review carried out by the group of its global markets business contributed to reducing the risk profile on equity and credit structured products in order to reduce the sensitivity of global markets’ revenues to market dislocations. A cost reduction plan was also launched in 2020, with the objective of an expected net reduction of around €450m between now and 2022-2023.

Finalisation of the repositioning of the global markets business is a priority in 2021, the bank stated in its results.

The bank issued 20,677 flow products, such as discount and (capped) bonus certificates, and 26,839 leverage certificates in Germany during the quarter (Q4 2019: 2,937 and 21,366, respectively). On top of that, 82,425 open-ended turbo certificates were issued by SG in the period (Q4 2019: 39,492), according to SRP data relating to public offerings only.

In France, the bank sold 115 structured products worth an estimated €400m, significantly down from Q4 2019 when €1.2 billion was collected from 247 products. Ninety-six percent of the French products were autocalls that were distributed, among others, via Adequity, DS Investment Solutions, Elae Capital, Finaval Conseil and AG2R La Mondiale. They included 70 structures linked to a single index, of which the Euro iStoxx Equal Weight Constant 50 – seen in 28 products – was the most frequently used, followed by iStoxx Europe 600 Energy ex Coal GR Decrement 50 EUR Index (10), and Euronext Euro 50 ESG EW Decrement 50 Points Index (seven).

Other European markets where the bank was active were Belgium (€27m from five products) and Finland (€4.5m also from five products) while in the UK it sold 12 products that collected on average £0.77m in the quarter. The bulk of the UK distribution was launched via Tempo Structured Products (eight products worth £5.75m) with Meteor Asset Management and Idad distributing two products each.

Outside Europe, it was the manufacturer behind 229 private placements targeted at investors in Taiwan (US$820). In Japan, the bank issued seven products (US$72m) which were available via local securities firms while in Hong Kong SAR it launched 846 warrants and callable bull bear certificates (US$200m).

As of 31 December 2020, the group’s consolidated balance sheet included debt securities issued of €138.9 billion (end-December 2019: €125.2 billion) and an outstanding for hedging derivatives of €12.4 billion (€10.2 billion).

By the end of December, the parent company had issued €34.3 billion of medium/long-term debt, having an average maturity of 5.4-years and an average spread of 59 basis points. The subsidiaries had issued €2.9 billion.

Thirty-eight percent of the expected funding programme for 2021 was already achieved on 28 January 2021. The annual structured notes issuance volume of approximately €16 billion was slightly lower than previous years.

Click the link to read the full Société Générale Group fourth quarter and full year 2020 results, presentation and consolidated financial statements.