Societe Generale SA’s long-suffering shareholders are counting on the arrival of a new chief executive officer to reinvigorate France’s worst-performing bank stock since the 2008 financial crisis.
(Bloomberg) — Societe Generale SA’s long-suffering shareholders are counting on the arrival of a new chief executive officer to reinvigorate France’s worst-performing bank stock since the 2008 financial crisis.
Slawomir Krupa assumed the job Tuesday, replacing Frederic Oudea, who stepped down after 15 years in charge. During his tenure, SocGen shares slumped 44% including reinvested dividends, compared with returns of 71% for BNP Paribas SA and 17% for Credit Agricole SA.
Now, some bulls say the 48-year-old Krupa has a number of levers to pull that will help get the share price going again. Antonio Roman, manager of the Axiom European Banks Equity fund, cites a tie-up in cash equities and research with AllianceBernstein, the merger of its French retail networks and the acquisition of LeasePlan by SocGen’s car-leasing arm, ALD SA.
“We’re finally getting to the end of the ordeal,” said Roman, whose fund has outperformed 99% of peers over the past three years. He’s been adding to his stake in SocGen, which is the fund’s third-largest holding.
SocGen shares rose 2.3% to €23.90 at 12:59 p.m. in Paris.
One key aspect in his investment thesis is whether the new CEO can communicate better with investors, Roman said. Krupa, the former head of SocGen’s investment bank, comes across as rather aggressive and is likely to give some punch to the company’s communications, Roman said.
“They really had communication issues,” Roman said. “If you think that Krupa will be better at it, there’s clearly a lot of value at hand.”
A SocGen spokesman declined to comment. Oudea, in an interview with Les Echos published Monday, said, “In the end, I leave with only one frustration, the stock price and failing to get the buy-in of the market.”
Krupa still needs to win over some skeptics. Since the board announced in September that he would be the new CEO, analysts have grown less bullish on the stock judging by the recommendation consensus compiled by Bloomberg, in which a buy rating is 5 and a sell is 1.
The stock also has underperformed other lenders’ shares in the period, which coincided with a furious October-to-March rally in bank stocks and the subsequent turmoil triggered by the fall of US regional lenders and Credit Suisse Group AG.
SocGen rivals Deutsche Bank AG as the cheapest stock in the Stoxx 600 Banks Index, with both at 0.3 times book value. The French lender’s market value has shriveled to less than €19 billion from about €73 billion 15 years ago.
Krupa’s first briefing for investors, scheduled for September, will be a key test of whether he can indeed unlock value in SocGen’s shares. Fixed-income investors will be watching as well.
“At the end of the day, the bank will be judged on its capacity to structurally improve profitability and deliver on key objectives,” said Rafael Quina, senior director for financial institutions at Fitch Ratings. He said he doesn’t expect SocGen’s A- credit rating to be upgraded to the A+ level of BNP Paribas and Credit Agricole in the next two years.
It may indeed take time for investors to rethink their take on the bank given the volatility that has plagued the sector this year, said Gilles Guibout, head of European equity strategies at Axa Investment Managers.
“The difficulty for the stock is that investors tend to favor the banks with the most visibility given the uncertainties surrounding the sector,” he said.
(Updates with stock move in fifth paragraph.)
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