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Investment banking comeback for SG & CA

Wednesday, May 06, 2015 - 01:51

Societe Generale and Credit Agricole joined bigger French rival BNP Paribas in posting stronger first quarter earnings on firm revenues from investment banking. As David Pollard reports, brisk financial market trading and booming corporate bond issuance offset lacklustre performances in their domestic retail banking markets.

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Investment banking: so dead. Or at least that was a very recent prediction. The latest raft of results suggest it's alive, and fighting back. After BNP Paribas, Credit Agricole and SocGen are the latest to report a surge. For Credit Agricole: a rise of nearly a quarter in corporate and investment business to 1.2 billion euros. And a near 22 per cent increase for Societe Generale. Justin Urquhart Stewart of Seven Investment Management. SOUNDBITE (English) JUSTIN URQUHART STEWART, SEVEN INVESTMENT MANAGEMENT, SAYING: ''It's fascinating to see of course, where everybody wanted to do away with investment banking two or three years ago, now the French banks are actually showing this is a profitable area ... What you'll find is that as the cycle goes round, they're in the position now where they're able to carry out more mergers and acquisitions work, more funding work, and lo and behold their fee generation ability has been improving.'' That strength countered a weakness in their retail arms for both banks. SocGen's reporting a fivefold increase in its net income - with a smaller hit from its struggling Russian unit also helping there. But the standout numbers of the day are revenues from equities trading. With huge amounts of central bank liquidity flooding into financial markets - and record highs in global stocks - they're up nearly a third in SocGen's case. Credit Agricole benefitted from strong bond issuance - as corporate borrowers locked in record low interest rates. Overall, it posted a 2.6 per cent increase in first-quarter net income - that also got a boost from lower risk costs. SOUNDBITE (English) JUSTIN URQUHART STEWART, SEVEN INVESTMENT MANAGEMENT, SAYING: ''A lot of that has been on the basis of the support that has been given to the banking system by the ECB, quantitative easing coming through, not so much actually coming through, but the actual confidence that gives. So good for investment banking, what you have to now show is actually can they sustain this over a period of time, and I wonder if that's really going to be capable.'' Retail revenues fell for both - each hit hard by high, state-regulated interest rates French banks have to pay out on popular savings accounts.

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Investment banking comeback for SG & CA

Wednesday, May 06, 2015 - 01:51