Societe Generale’s network in Eastern Europe is shrinking

Posted Apr 11, 2022, 7:02 PMUpdated on Apr 11, 2022 at 7:10 PM

This is a page of history that is turning for Societe Generale. By announcing its withdrawal from Russia and the sale of its Rosbank subsidiary to the oligarch Vladimir Potanin, the bank is not only continuing its international disengagement. It also loses what was one of its specificities among the major French banking groups, in the same way as its past glory in the derivatives business: its historical presence in Eastern Europe.

The context is obviously special: the transaction follows the invasion of Ukraine by Russia and the difficulties for the company to continue its activities in a country targeted by sanctions. It nevertheless records the reduction of the geographic footprint of the banking group in Europe.

Between 2016 and 2019, Societe Generale had already carried out a major refocusing by selling subsidiaries in Poland, Bulgaria, Croatia, Serbia and Albania, to better focus on countries where it held significant market shares.

The jewel of Prague

This was the case in Russia, where the group claimed to be one of the foreign leaders in the sector, since its acquisition of a majority stake in the capital of Rosbank in 2008. Last year, the bank posted outstanding loans of 10, 5 billion euros and outstanding deposits of 13.1 billion. Its turnover amounted to 643 million euros, for a net profit of 115 million euros (respectively 2.5% and 2% of the group total).

When leaving Russia, Societe Generale will no longer be present, in terms of retail banking activities, except in the Czech Republic, with Komercni Banka (KB), and in Romania, via BRD.

Prague remains the jewel of the group, often cited as an example in the financial presentations of the French. Committed to a profound digital transformation, KB is the third Czech bank in terms of balance sheet size, with 29.3 billion euros in assets, around 7,400 employees and 242 branches, for a turnover of more than one billion euros. “It’s a very good asset and one of the great stories of the group”, recognizes a specialist in the sector.

A historic presence in Africa

Outside Europe, Societe Generale remains active in Africa, particularly in the Maghreb, with a historic presence in Morocco, and more recently in Algeria and Tunisia. In these three countries, the bank has more than 2 million customers, with 653 branches. It is also well positioned in countries such as Côte d’Ivoire, Senegal and Cameroon, where it carries out the majority of its activity with companies.

However, the group has just put an end to its mobile payment activities on the continent. The Yup service, which went live in 2018, failed to compete with the giants already in place in a hotly contested market.

Formerly the group’s cash machine, international banking is therefore seeing its share gradually reduce at Societe Generale. A shrinkage which contrasts with the expansion strategy led by its competitor Crédit Agricole in Italy, which has just entered the capital of Banco PM, a year after the takeover of the regional establishment Creval.

Will the bank of La Défense be keen to set out again to conquer foreign markets, after the Russian episode? “It would be surprising. They already have a lot to do in their existing businesses, with the initiatives underway, particularly in retail banking in France, before they can think of a new international expansion,” comments Rafael Quina, financial analyst at Fitch. The 5 billion euro takeover of the car leasing giant LeasePlan, present in around 30 countries, could nevertheless act as a new start abroad.

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