The official statement regarding reports that French bank Societe Generale was selling its stake in futures broker Newedge is that they "do not comment on market rumors."
The bank did put out a news release earlier in September describing “transformation” efforts by the bank that would reduce its exposure to sovereign debt, lower it s leverage and control costs.
Societe Generale Chairman and CEO Frédéric Oudéa stated in the release, “Societe Generale’s foundations are solid. Its exposure to (Greece, Italy, Ireland, Portugal and Spain’s) sovereign debt is low and very manageable in any final scenario. The Group’s businesses are profitable, it liquidity situation is very much satisfactory and so are its shareholder equity and solvency levels.”
The release detailed how the bank has been reducing access to short-term liquidity.
What may have led to rumors about Soc Gen unloading assets is an item in the release under the sub title “Resolute actions to accelerate the transformation.”
In addition to lowering leverage and cutting costs, it said, “The Group would free €4 billion of capital by 2013 through business assets disposals.”
Oudéa did not provide specifics regarding what assets would be sold at a press conference following the release but said they would mostly come from the global investment management and services division, which includes Newedge as well as several other of the bank’s assets including Amundi Asset Management, TCW, Societe Generale Private Banking and Societe Generale Securities Services.
Since then there has been a lot of speculation regarding exactly what assets would be sold to raise that capital. Part of the speculation surrounded Newedge but what I didn’t see speculated on was who in the world would buy them.
Newedge is the number one futures commission merchant based on customer segregated funds. As of the Commodity Futures Trading Commission’s July report, Newedge had $24.7 billion in customer segregated funds, increasing their lead over second place Goldman Sachs considerably. And that does not include customer funds held outside of the United States.
I couldn’t guess what type of player would have the size and scope to purchase such an asset and for how much.
And from experience I know that that #1 ranking means something to the folks at Newedge, which was formed by the merger of Fimat and Calyon Financial in 2008 after a long courtship.
We will shortly be putting together our annual ranking of Top FCMs. One item included is a survey question regarding non-U.S. customer equity. It was added a few years back after Fimat made the point that their size was underrepresented because their non-U.S. assets were not included. We thought they had a point and decided to include an item on non-U.S. assets in our survey but the item is not tremendously useful as not everyone includes it.
We often hear complaints that customer seg funds is not the best measure of a firm but it is the only one we can get that is complete and comes from a third party source. And despite complaints all the FCMs are eager to see how they measure up.
Since the merger Newedge has competed with Goldman Sachs for the top spot and now appears to be the clear #1.
I wonder if we will have a last minute change. I doubt it.