SocGen weighs alliance with rival BNP, says report
Our Banking Bureau
8 June 2007

Mumbai: French bank Societe Generale has proposed an alliance with bigger domestic rival BNP Paribas, in a deal that could create a national banking leader in France, a local newspaper reported.

Daniel Bouton, head of SocGen, had asked two investment banks to advise on a tie-up with BNP that could create a combined entity dominating the market in France by market value and standing third in Europe as a whole, Les Echos said

While a deal could shield SocGen from any unsolicited takeover bid by other European suitors, it would affect thousands of jobs due to the overlapping branch networks of the two lenders, making it politically controversial.

It would also speed up consolidation in Europe's banking industry.

The move comes just weeks after Italy's UniCredit moved to merge with domestic rival Capitalia and Dutch ABN AMRO agreed a deal with Barclays inviting a rival offer by a consortium of Royal Bank of Scotland, Fortis and Santander.

A Societe Generale spokesperson refused to comment on "rumours", adding a major operation was "neither necessary nor urgent" for the bank.

BNP had made a failed takeover attempt on SocGen in 1999, after which it managed to absorb Paribas.

BNP chief executive Baudouin Prot also last month said his bank was not interested in a deal with Societe Generale, telling shareholders such a link would carry "huge execution risks".

BNP is larger than SocGen with a market capitalisation of around 80 billion euros compared with SocGen's 64 billion.

At the moment, HSBC is the biggest European bank by market value, followed by Royal Bank of Scotland and Banco Santander. BNP is number 4 and SocGen ranks 9 by market capitaliaation, and the combination would be third.

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