MERGERS THAT BIND EUROPE TOGETHER

It is only over the past five years that SGSS, the securities servicing arm of Société Générale, has really started to develop. In that time the company has grown to third largest in Europe and ninth worldwide with ?2580bn in assets under custody. From the start, the firm has been clear that its intention is not to compete with the big US players, but rather to become a leading domestic player in a number of continental European countries. To this end a combination of organic growth and acquisition is slowly but surely propelling the firm to a position of strength. SGSS’s key countries are currently France, Italy, Spain and Germany as well as the so-called “offshore” centres of Luxembourg and Ireland. The firm also maintains a growing UK presence. “As you would expect, we have an extremely strong position in our home market France, especially if you look at the non-captive business,” says global head Alain Closier. He says that the company is moving to attain leadership in each of Europe’s domestic markets. In Italy, for example, the acquisition of UniCredit’s securities business has given SGSS a strong foothold. Mr Closier also rates the firm’s presence in Germany, following the takeover of Pioneer Investment Fund Services, as the strongest foothold possible in this market. In Spain, meanwhile, SGSS is servicing foreign entities investing in Spanish assets and the aim is to beef up local presence to target domestic customers too. Taking this philosophy forward, how will SGSS prosper in a marketplace which is increasingly characterised by a small number of big global players and a number of small niche players? Is there room for such a mid-sized player? Mr Closier comments that the big four global players, huge though they may be in terms of assets under administration, derive those figures mainly from assets based in the US. SGSS is, he says, more able to offer a product range that is closely aligned to the needs of European asset managers and that also comes at an attractive cost per unit. “Many European players don’t want to feel that they have been swallowed by a very large administrator,” he says. “They want a sense that they are getting a better quality of service that can be more closely tailored to their needs by a firm like us.” He adds that with the bigger players all merging with each other, as was the case with BoNY and Mellon, the resulting behemoth platforms will serve only to reinforce this feeling and that such platforms are better suited to the US market. “Huge platforms are not such a good fit in service terms for European players,” he says. Indeed, he adds that just because Europe is considered to be one market means that people often forget that it is composed of separate nations each varying hugely in terms of regulation, market developments and cultural preference. “It’s never going to be a question of one size fits all in Europe,” he says. “That’s why our strategy is to consider each domestic market as individual and aim to become a force to be reckoned with in each. It’s all about knowing what the domestic culture is and the only way to do that is by being there rather than having remote servicing.” SGSS is also looking to enter new markets where it sees great potential. This is set to include China and India but closer to home Central and Eastern Europe is looking attractive, as is Russia. “We’ve got a list of countries where we see enough asset managers and wealth managers setting up to demand a services provider like us being present. Again we can offer value added by taking into account various cultural differences and offering a service wrapped around that,” he says.

Newedge looks to lead brokerage Alain Closier reckons that the next five years will all be about adapting to the post Mifid environment and that talk of firms sitting back and planning to adjust reactively are not too far fetched. “Those firms will suffer in years to come,” he predicts. “The time to do something is now in order to be ready and able to move with the times.” To this end SocGen’s broking subsidiary Fimat and Calyon, the investment banking arm of Crédit Agricole, are set to complete their merger at the start of 2008. The new entity will be called Newedge and the aim is to take advantage of the Mifid quest for best execution. It will also look to lead in clearing of derivative based products. “Brokerage is an interesting area especially in a fragmented market such as Europe. The two together will emerge as a leader in this area and capture much of this growing market,” predicts Mr Closier.