PARIS -- Officials at SG Asset Management will dominate the top slots at the money management arm created from the merger of Societe Generale SA and Paribas SA.
Philippe Citerne, the second-ranking member of SocGen's board, will oversee money management and banking services, which includes private banking and custody. Sources said his deputy, Philippe Collas, chairman and chief executive of SG Asset Management, will serve as head of the combined institutional money management business.
The $17.2 billion merger of the two Paris-based banks into SG Paribas will create Europe's 10th biggest money manager, with E220 billion ($250 billion), and the world's sixth-largest global custodian, with more than E580 billion.
On a pro forma basis, the combined asset management and banking services unit would have generated an estimated 9.4% -- or E500 million -- of the bank's 1998 pre-tax profits, generating a 37% return on equity.
The merger is expected to be the first step in a wave of consolidations among French banks, with important consequences for the money management business in Europe.
Already, Andre Levy-Lang, chief executive of Paribas and incoming chairman and chief executive officer of the combined bank, has signaled his interest in acquiring a stake in the upcoming privatization of Credit Lyonnais, which is another major player in French money management. And observers believe the SG-Paribas deal will force Banque Nationale de Paris and Credit Commercial de France to scurry for partners.
"The moves in the French market just are the beginning," said Michel Piermay, president of Fixage, a Paris-based consultant.
The marriage of retail bank Societe Generale and investment bank Paribas clearly creates some overlap in the money management area. On the whole, the banks are expected to complement each other.
"Paribas lacks management, but the infrastructure is there and it has good (portfolio) managers. SG has strong managers but lacks good performance and has a huge retail network. Perfect fit," said one French observer, who asked to be unnamed.
The dominance of SG officials comes as no surprise. Not only does SG Asset Management have more than twice as many assets as Paribas -- some E150 billion vs. E70 billion at Paribas -- but the unit has become an aggressive player in recent years.
The predominance of the SGAM team is perceived as good news. Mr. Citerne will oversee the expanded asset management and banking services unit. His counterpart at Paribas, Jean Clamon, had been named to head that area in a mid-January reshuffling. At the combined bank, Mr. Clamon will return to supervise finance and information technology areas. Both he and Mr. Citerne are part of a six-person committee to integrate the banks.
At Mr. Collas' initiative, the bank bought an 85% stake in Yamaichi International Capital Management Co., Tokyo, when its parent collapsed in November 1997. That purchase gave SGAM a $20 billion base of assets in Japan.
Then he lured former Morgan Grenfell Asset Management Managing Director Nicola Horlick and former Mercury Asset Management manager John Richards to set up a money management shop in London. Now headed by former MGAM chief Keith Percy, the unit picked up L500 million ($825 million), four-fifths of which are U.K. pension accounts, in its first year of operation.
And, last April, Mr. Collas formed a joint venture with Frank Russell Co. to market Russell's multimanager funds to SG retail and institutional clients across continental Europe. To date, the operation has pulled in $350 million from four retail funds; and Frank Russell runs another $130 million to $140 million for SG retail clients in a separate U.S. small-cap fund created before the joint venture.
