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Frederic Oudea, 44, CEO to-be of Societe Generale, is expected in the short term to follow in the footsteps of his predecessor, Daniel Bouton, and defend a “stand alone” policy, several sources and market observers said.
Oudea, who will take the helm of the bank on May 12 in a meteoric rise from his current job as CFO, has already stated at a high level meeting internally his intention to strive for the independence of the bank, a well-informed source said. He has even told his peers he is not planning to merge with French competitor, BNP Paribas, this source added.
A person with knowledge of the thinking of BNP Paribas also said the bank “had no elements to believe that the new CEO will deviate from the stand-alone policy” defended by Bouton. BNP Paribas had studied a friendly merger with rival SocGen after the trading scandal that left SocGen with a EUR 4.9bn loss. But given the little enthusiasm shown by the management of SocGen, BNP said last March 19 that it was no longer contemplating such a merger.
A person knowledgeable of the thinking of Societe Generale said Frederic Oudea ”is a man close to Bouton” and is therefore “likely to maintain the strategy of independence.” It was Bouton who brought him to the bank in 1995, when Oudea was at a cabinet job with President Nicolas Sarkozy, then Budget Minister. It was also Bouton who appointed Oudea CFO in 2002 and who has now orchestrated his promotion to the number one spot. A shift in strategy could take place, but “it is unlikely to happen without Bouton’s blessing,” this person added.
Several industry observers also pointed out that Oudea having just been unexpectedly appointed CEO, will not be in a hurry to throw SocGen into a merger that would most likely make him lose his position. “He is young, he will want to manage the bank for some time,” an observer said.
Oudea’s nomination comes only four months after the bank discovered the trading scandal. Before the events, Oudea’s promotion was not even on the cards. The job was widely expected to be given either to Philippe Citerne, managing director, or Jean-Pierre Mustier, head of the investment bank. Both men were weakened by the scandal and lost out on the race for succession. At the same time, Oudea won a reputation for competence under strain.
The Board “was not prepared for what happened. There was no successor in place,” a source with knowledge of SocGen said. Oudea “is fast, clever and will make a good CEO,” this source commented.
However, “the question of the merger will come up again in some time,” another industry observer said. “Oudea comes from a new generation,” and may take a different look at things over time, he said. He is also expected to have an easier relationship with his European peers, whereas Bouton had the reputation of being “abrupt and aloof,” this observer pointed out.
Oudea may also listen to bank employees, who would much prefer a tie-up with a European bank than with rival, BNP Paribas, this industry observer said. So far, SocGen has been protected by the “Trichet Doctrine” (from the name of the head of the European Central Bank), that is perceived as prohibiting hostile takeovers. That will not continue under new EU legislation, to be in force by March 2009 and that will prohibit discrimination in bids for financial institutions, this observer explained.
A source with good knowledge of SocGen pointed out that Oudea has not been involved in M&A before, as this was handled directly by Bouton and Citerne. Oudea is rather known as a brilliant mathematician, who comes from the prestigious Ecole Polytechnique. He has worked in corporate investment banking and is an expert in derivatives. “Oudea’s first preoccupation will be the future of the investment bank,” this source said.
The new CEO “will look at the situation with new eyes,” and will soon have a personal view of the bank. “He will show flexibility,” this source emphasised.
This year will be crucial for the fate of the investment bank. It will show how much reputational loss it suffered after the trading scandal, this source added. Its future is now a major stumbling block to any potential merger, because there is no visibility as to what might happen.
“If the division is perceived as having to suffer a long time from the aftermath of the trading loss, Oudea may think of marrying it to another institution,” however difficult this decision might be, this source speculated.
Another source with knowledge of SocGen said Oudea “will be willing to make his mark and do things that have not been done so far.”
This source added “on some business SocGen does not have critical mass. Up to now, management has always said: we will get there. But in one or two years, he may want to reconsider this and the future of the bank.”
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