SocGen to buy Commerzbank's equity markets, commodities arm

A branch of Commerzbank in Frankfurt. Commerzbank has been restructuring as parts of its business have struggled amid weak markets and slow loan demand. Its "4.0 strategy" entails divesting non-core assets to raise capital for the company's core bank
A branch of Commerzbank in Frankfurt. Commerzbank has been restructuring as parts of its business have struggled amid weak markets and slow loan demand. Its "4.0 strategy" entails divesting non-core assets to raise capital for the company's core banking franchise.PHOTO: EPA-EFE

PARIS • French bank Societe Generale yesterday said it will buy Commerzbank's equity markets and commodities (EMC) business, strengthening its presence in areas such as derivatives, while the Frankfurt-based bank itself looks to sell off non-core assets.

The two banks did not disclose a price for the transaction, although Commerzbank said its EMC division had 2017 gross revenues of €381 million (S$606 million).

Commerzbank, still partly owned by the German government, has been restructuring as parts of its business have struggled amid weak markets and slow loan demand.

SocGen said the purchase would boost its Lyxor arm, which has a strong presence in the field of exchange traded funds (ETFs), and raise its general profile in Germany, the euro zone's biggest economy.

SocGen's investment bank has been under pressure following the departure of previous head Didier Valet in March over a financial settlement of an investigation into alleged Libor rates rigging.

It has also had some relatively tepid performances in equity derivatives - an area where it has been traditionally strong.

"In addition, while complementing Lyxor's ETF franchise, this acquisition would be transformational for our activities in Germany as it would enable Societe Generale to reach a new scale in the leading euro zone economy," said SocGen deputy chief executive officer Severin Cabannes.

The sale is in line with the German bank's "4.0 strategy", which entails divesting non-core assets to raise capital for the company's core banking franchise, said Commerzbank chief executive Martin Zielke. "We are simplifying our business, we are contributing to our cost-cutting targets, and we are freeing up capital for the benefit of our core business with private and corporate clients," he added.

Commerzbank's larger rival, Deutsche Bank, has also been under pressure of late, with the German bank having failed a United States regulatory stress test recently.

The transaction excludes Commerzbank's cash equity brokerage and commodities hedging business, but will include areas such as its structured trading and investment products as well as its Comstage ETF brand.

SocGen said that it expected the deal to get regulatory clearance in the second half of this year, and added it would have a positive impact on the French bank's return on tangible equity.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 04, 2018, with the headline 'SocGen to buy Commerzbank's equity markets, commodities arm'. Print Edition | Subscribe