SocGen Said to Lift Newedge Stake in Swap With Agricole

Societe Generale SA, France’s second-largest bank by market value, may become sole owner of the derivatives brokerage Newedge Group, two people with knowledge of the matter said.

The Paris-based bank plans to swap part of its stake in asset manager Amundi Group to Credit Agricole SA for the 50 percent of Newedge it doesn’t already own, the people said, speaking on condition of anonymity because the matter isn’t public. An announcement may be made as soon as tomorrow, when the banks report earnings, the people said.

Societe Generale and Credit Agricole, which tried to sell Newedge in 2011, are poised to unbundle the almost six-year-old partnership, the people said. Credit Agricole’s corporate and investment-banking unit is exiting the brokerage joint-venture after shutting down its equity derivatives business to comply with stricter capital rules. Societe Generale will reduce its stake in Amundi to about 20 percent from 25 percent as part of the transaction, boosting Credit Agricole’s holding in the fund manager to about 80 percent, the people said.

“Credit Agricole is retreating from an activity with very low profitability,” said Alex Koagne, a Paris-based analyst at Natixis SA. “For Societe Generale, over the long term it can be a winning deal, provided that the restructuring is carried out well.”

Officials at Credit Agricole and Societe Generale declined to comment when reached by phone. Le Figaro reported the information yesterday.

Earnings Estimates

Societe Generale rose 0.2 percent to 40.43 euros by 11:46 a.m. in Paris, valuing the bank at about 32.3 billion euros ($43.6 billion). Credit Agricole, France’s third-largest bank by market value, gained 0.7 percent to 8.81 euros.

Newedge had net income of 14 million euros in 2012, down from 33 million euros a year earlier, as sales fell 10 percent and it booked costs related to a job-cutting plan for the Paris office, according to its financial report. Newedge said in December it would cut costs and jobs to counter declining volumes and new regulations. The plans included splitting trade execution and clearing services for futures and options in two.

Societe Generale and Credit Agricole are both slated to publish third-quarter results tomorrow at 7:00 a.m. Paris time. Earnings at both banks will probably rebound from year-earlier levels, when they were hurt by losses tied to the sales of their Greek units, Bloomberg surveys of analysts show.

No Goodwill

Net income at Societe Generale will probably show an increase to 635 million euros from 90 million euros a year earlier, according to the average estimate of eight analysts surveyed by Bloomberg. Credit Agricole may report an 879 million-euro profit, compared with a net loss of 2.85 billion euros a year before, a survey showed.

Both banks said in February they have no remaining goodwill on their books tied to Newedge following writedowns last year. Societe Generale also had no goodwill on its balance sheet related to its asset-management activities, while Credit Agricole had 2.03 billion euros of goodwill on its fund business at the end of 2012, the companies’ annual reports show.

While writing down goodwill doesn’t deplete capital, it reduces profit and signals a company overpaid for acquisitions.

Before it's here, it's on the Bloomberg Terminal.