PARIS — Société Générale and Crédit Agricole, two of France’s biggest banks, said Thursday they were in talks about an asset swap that would give Société Générale full control of their Newedge Group derivatives venture.
The banks, both of which are based in Paris, said Société Générale was planning to pay Crédit Agricole 275 million euros, or $ 371 million, for its 50 percent Newedge stake. Crédit Agricole would buy 5 percent of their jointly owned asset management company, Amundi, for €337.5 million, reducing Société Générale’s Amundi stake to 20 percent from 25 percent.
For Société Générale, the announcement marks a change in philosophy, as Frédéric Oudéa, the bank’s chairman and chief executive, had sought to sell Newedge. Société Générale booked a nearly €380 million goodwill write-down mostly on the joint venture in the fourth quarter of 2012.
Taking full control of Newedge, “would enable us to give our clients access to an integrated offer across global markets, from execution to prime and clearing services on both listed and over-the-counter products,” Didier Valet, Société Générale’s head of corporate and investment banking, said in a statement.
For Crédit Agricole, the disposal of the Newedge stake fits in with a strategy of divesting investment banking businesses to reduce risk, and follows its sales of Cheuvreux in the second quarter and CLSA in July. It has also sold its interest in Bankinter, a Spanish lender.
Both banks also reported earnings on Thursday that were much higher than the same period last year.
Société Générale said its net income for the July-September period came in at 534 million euros, or $ 722 million. That represented a roughly sixfold increase from the 90 million euros it posted for the same three months a year earlier, when results were artificially depressed by an accounting charge the bank took against the value of its own debt.
The results fell short of the consensus forecast of a €675 million profit among analysts surveyed by Reuters.
Société Générale’s profit was checked by €200 million of new litigation provisions, amid media reports that the bank and other European lenders will face fines from the European Commission for rigging benchmark euro zone interest rates. That raises its total provisions against legal issues to €700 million.
The bank also took €223 million of charges against its own debt.
Jon Peace, an analyst at Nomura in London, noted in a research note that the pretax profit, at €728 million, was better than the consensus forecast of €681 million, underpinned by strong equities trading, and that there had been “no significant operating negatives beyond the litigation risk.”
Mr. Oudéa, the Société Générale boss, has been restructuring the bank along three main lines to simplify its organization: French networks; international banking and financial services; and a global unit that incorporates investment banking and private banking, among others. To that end, he is working to raise the bank’s standing in Russia, agreeing earlier this year to acquire VTB Group’s 10 percent share in Rosbank, taking Société Générale’s stake to 92.4 percent. He has also sold Société Générale’s Japanese private banking business.
Mr. Oudéa said the bank’s restructuring would continue and that “the implementation of a new, refocused and simplified, organizational set-up will help improve the group’s efficiency.”
Société Générale said its fully loaded Basel III Core Tier 1 ratio – a measure of its ability to withstand financial shocks – rose 0.51 points to 9.9 percent at the end of September from the second quarter. It said its Basel 2.5 capital ratio stood at 11.6 percent.
Société Générale ranks behind only BNP Paribas in terms of market capitalization among listed French lenders, and ranks third behind BNP Paribas and Crédit Agricole by assets.
Credit Agricole posted third-quarter net income of 728 million euros, a major improvement from the loss of 2.9 billion euros it reported a year ago, when it took a hit on the cost of disposing of Emporiki, its Greek unit.
Credit Agricole said its fully loaded Basel III Core Tier 1 ratio stood at 7.8 percent to 8.0 percent, depending on the outcome of its effort to deduct losses on the disposal of Emporiki.
Shares of Societe Geenerale rose 2.2 percent in Paris early trading, while Credit Agricole gained 3.1 percent.