Société Générale, one of the grande dames of French finance, is making a push for recognition and expansion in private banking on both sides of the English Channel.
Business strategists at the top of the wealth unit, managing €150bn ($163bn), are quick to recognise the challenges ahead.
After an adventure in Asia – dubbed an “experimental” mission by observers – the bank decided to sell out its $12.6bn Singapore operation to regional powerhouse DBS back in 2014, following failure to garner higher levels of assets.
Now the lucrative book of business associated with wealthy Russians is being ditched, due to ethical and compliance concerns following Moscow’s brutal invasion of Ukraine.
Moreover, a broader soul-searching exercise has been launched within the group, as the bank seeks to cement a definitive identity in the wealth management world.
The first task in this journey, believes Olivier Paccalin, Paris-based commercial director responsible for the bank’s wealth and investment solutions business, is for employees to know both their role and limitations within the broader financial services ecosystem.
“Of course, our objective is to serve more clients and develop the business,” says the energetic banker between morning sips of his double espresso in the bank’s historic headquarters on Boulevard Haussmann.
“But SocGen Private Bank is a small business in a big group. We will never be a top tier private bank,” he says with a hint of realism regarding the group’s redrawn international ambitions. “We are part of a big international group with a huge franchise in many businesses. So one of our key objectives must be to act as the appropriate link between those franchises.”
Opening the door
In his role, overseeing the gathering of assets in all of the bank’s chosen geographies –including the French home market, where the bank’s clients have invested €80bn, the UK, continental Europe including Switzerland and Luxembourg, and the Middle East – Mr Paccalin must open the door connecting his wealthy family clients to all of the products and facilities available from various parts of the group.
The flipside, and a potentially even more onerous task, is that he must convince SocGen’s army of investment and corporate bankers, many of them selling the bank’s fabled array of structured solutions, that it benefits them to access his book of wealthy clients. “The reason I am waking up every morning is this,” he stresses.
While fierce local rival BNP Paribas makes hay in Asia, with strong franchises now in both Hong Kong and Singapore beginning to pick up steam, Mr Paccalin’s ambitions are closer to home. “It is not my nature to have any regrets. The past is the past and I am here to build the future,” says the pragmatic yet occasionally philosophical Mr Paccalin. “Today we are a European private bank serving families not far from us and in the Middle East. We do it well. We are no longer in Asia and have no plans to go back.”
He is, however begrudgingly, respectful of his rivals’ business successes. “I am not saying Asia is a bad idea, but we are more interested in the strategy of enlarging our footprint for French and UK clients and extending it in other European countries.”
Much of that strategy, he says, will be masterminded from the bank’s operations hub in Luxembourg, which he dubs “the toolbox of Europe”, hosting and administering SocGen’s fund ranges, management companies and non-listed vehicles for family offices.
“We might not be managing this money, but we have billions in assets under administration and that is a way into the family’s intimacy,” he believes. “This is our weapon in Luxembourg and our team can sell from there into other jurisdictions.”
One of the constituencies, however, that Mr Paccalin’s bankers will no longer be able to sell to is their former clientele of Russian origin, now firmly confined to the “do not approach” bucket by SocGen’s compliance department, in the interests of minimising “reputational risk”.
“We have a long history with Russia, but decided to put an end to it and that’s what we did,” he says, refusing to be drawn into the discussion about whether this for moral or regulatory reasons. “The group has made a decision and that’s what we apply across our business. Russia is no longer a country we want to do business with. Speaking to competitors is one of my hobbies, so I know we are not alone in this.”
It is important, believes Mr Paccalin, that when banks make a decision to outlaw an important part of their client base, they find a business to replace this with. “Of course, when you get rid of clients, there is a price for this. But if you take the private bank business as a whole, we had a very good year and we can afford it.”
Part of that success has come from boosting the Kleinwort Hambros business in London. SocGen bought Hambros Bank in 1998 and Kleinwort Benson in 2016. The combined franchise, currently being rebranded as SG Kleinwort Hambros, to reflect both its root and ownership, manages client assets of €14bn, with bold ambitions for further growth.
Let me be precise about Kleinwort Hambros. We are the biggest French bank in London from a wealth management point of view
“Let me be precise about Kleinwort Hambros. We are the biggest French bank in London from a wealth management point of view, as our competitors – we think about BNP and Crédit Agricole – are not there with us,” says Mr Paccalin, preparing for a “strong push” in 2023. “We are the bank not only for the wealthy French living in London, but also the UK wealthy who want any flavour of the French taste, whether they want to buy a house in Lyon or an apartment in Paris.”
But Mr Paccalin does not micro-manage. He is more of an overall strategist, trusting Mouhammed ‘Mo’ Choukeir, CEO of SG Kleinwort Hambros, to run the London operation. The pair generally meet once a week to share ideas and goals. “There is not a diktat of what needs to be done on every topic,” insists Mr Choukeir, holding court in his West End office in London’s Mayfair, now used only for client meetings, as all the group’s UK operations have been moved to Canary Wharf.
His ambition to increase the franchise’s visibility involves signing up more clients with aspirations around managing assets in a climate-friendly fashion. “What we do is less about product innovation and more about delivery, how we can make that experience more intuitive, focused and bespoke,” he says.
When Mr Choukeir was chief investment officer, the bank promoted itself mainly according to asset management expertise. But that is no longer solely the case, with wealth planning, lending and fiduciary businesses now equally important and entrepreneurs seen as a more productive client base than old money.
The strategy involves attracting these idea generators through a fast-modernising culture and structure at the London operation. “We wanted to re-invent and re-imagine the future as part of our strategy and create ‘the start-up with 200 years of experience.’ That’s a cultural change,” says Mr Choukeir, who doesn’t deny his unit was put up for sale by SocGen several years ago, although now it is witnessing renewed “commitment” from head office.
Sharing the engine
“You may have deep roots, and that’s nice, but you won’t exist for the next 200 years, if you don’t continue to innovate and infuse an entrepreneurial spirit, innovate, take risks, make mistakes and take on those start-ups in the culture they have,” says Mr Choukeir.
The other part of the London plan involves enticing the burgeoning sector of external asset managers (EMs) – boutique firms and family offices, in both the UK and Switzerland – to use the firm’s platform and services. “We are sharing the engine, which is at the very heart of what we do, as a B2B model,” he says. “We have the tools which others can benefit from too.”
Wealth watchers are however slightly sceptical of the group’s efforts to successfully rebuild its private banking franchise, pointing out that there have been similar previous initiatives, later quietly discontinued.
“While SocGen has a strong local wealth management operation in Paris, it is difficult to understand how it can differentiate its offer outside its French heartlands, apart from through a focus on structured products and a lending offering, typically with those international clients that have an interest in financing or buying French property purchases,” says one consultant, who has worked closely with the bank.
Whatever the results of this latest medium-term development strategy, which includes transferring assets to the next generation as well as private market solutions, it is these structured products for which the firm is famed and where it continues to do brisk business.
“In all our countries, when we are in front of a big family, most of the time, the door opener is the structured solutions, because we are SocGen,” admits Mr Paccalin, with more than a hint of pride. “Even if we are just the private bank, in the mindset of investors, SocGen is ahead of the competitors on all that is linked to markets. In France and elsewhere in Europe, we are extensively using this tool. If the client is using five banks, the reason they come to us is for credit and structured solutions, linked to the markets.”