* SocGen to take over Newedge, sell 5 pct of Amundi
* C.Agricole refused EU Euribor probe settlement -CEO
* SocGen sets aside 700 mln in litigation provisions
* SocGen Q3 net 534 mln euros vs f'cast 674.9 mln
* Agricole Q3 net 728 mln euros vs f'cast 483.6 mln
By Lionel Laurent and Matthias Blamont
PARIS, Nov 7 French banks Societe Generale
and Credit Agricole have agreed an asset
swap designed to help narrow their business focus, part of
efforts to improve their investor appeal in a tough economic and
Like many lenders across Europe, both banks are under
pressure to find new strategies to cut costs and better compete
for market share as new curbs on risk taking hike the cost of
doing business and as a fragile recovery at home saps revenue.
They are also battling the legal and regulatory fallout from
the financial crisis, with Agricole pledging to fight any
accusation by the European Commission that it had colluded to
rig benchmark interest rates.
"I refused the notion of a deal that would have constituted
a recognition of responsibility," Chief Executive Jean-Paul
Brussels is expected to fine banks billions of euros next
month for allegedly operating like a cartel to manipulate
benchmark interest rates, Reuters reported this week, with both
Agricole and SocGen expected to be hit.
SocGen said it had set aside 700 million euros in provisions
for litigation issues without specifying which ones. The bank
declined to comment on a possible European fine.
The asset swap, unveiled on Thursday alongside quarterly
results, will involve SocGen buying its smaller rival's 50
percent stake in brokerage Newedge for 275 million euros ($372
million), while Agricole will buy 5 percent of their
asset-management venture Amundi for 337.5 million.
This would leave SocGen with all of Newedge, which offers
greater exposure to foreign-exchange and commodities markets,
and Credit Agricole with 80 percent of Amundi.
It would also sharpen differences between
investment-banking-focused SocGen and its 119-year-old
semi-cooperative rival, which since the 2008 financial crisis
has been retreating from trading and brokerage activities to
focus on more traditional retail banking and insurance.
"It's positive for Credit Agricole, which derives 40 percent
of revenue from insurance and asset management and which has
been pulling back from trading and derivatives," said Yannick
Naud, a portfolio manager at Glendevon King, who does not hold
shares in either bank.
"For SocGen, there will be synergies as well. The French
banks are becoming more and more different from one another."
Agricole's strategy may have paid off in the third quarter,
when it swung to a profit of 728 million euros from a 2.85
billion year-ago loss on the back of a painful exit from the
crisis-hit Greek market.
SocGen shares were up 4 pct and Credit Agricole was up 5.5
pct, extending their gains on back of the European Central
Bank's surprise rate cut.
But the bank also said it would push back a planned investor
day from later this year to March 2014, signaling potential
uncertainty ahead for investors as the European Central Bank
begins its health check of the region's lenders.
"While the investor day could bring even bigger changes,
expectations are being delayed," Citigroup analysts wrote in a
note to clients.
SocGen, which is retreating from areas such as
asset-gathering and which according to trade union sources is
planning up to 375 job cuts in its custody business, saw
quarterly profit jump more than fivefold to 534 million euros.
Analysts had expected profit closer to 674.9 million for
SocGen and 483.6 million for Agricole, according to the average
of forecasts compiled by Thomson Reuters I/B/E/S.
Smaller rival Natixis reported a 38 percent rise
in third-quarter profit on Wednesday as cost savings and robust
capital-markets trade offset economic weakness. BNP Paribas
, France's No. 1 bank, last week also reported a rise
in net income after cost cuts.
BNP also said it had made a non-binding offer for Polish
bank BGZ without giving a price.
Reuters first reported SocGen's plan to take over Newedge in
June. SocGen had previously sought to exit the unit as part of a
drive to strengthen its balance sheet, but a lack of buyers
pushed it to think up new ways of integrating it.
Agricole has already sold its other brokerage brands CLSA
and Cheuvreux as well as assets including its stake in Spain's
Bankinter in a bid to improve balance-sheet strength.
Agricole, which has lower capital ratios than rivals and its
own parent network of regional cooperative banks, is targeting a
Basel III core Tier 1 ratio of over 9.5 percent by end-2015. The
bank said its ratio would improve as a result of the Newedge
SocGen said it expected its capital ratio to fall by 10
basis points after the Newedge deal. It reached a Basel III
ratio of 9.9 percent at end-September and said it expected a
dividend payout ratio of around 25 percent of profits.