Posted Oct 1, 2022, 2:29 PM
Appointed Friday at the head of Societe Generale, Slawomir Krupa is preparing to take control of the group when all the ingredients are in place for a “perfect storm” on the financial system.
His entry into office is scheduled for May, at the end of Frédéric Oudéa’s mandate, but the signs of tension are increasing in the sector with a probable recession, an energy crisis, historic inflation and geopolitical tensions unprecedented for 70 years in Europe. .
The Franco-Polish investment banker, who managed the upheavals of the Kerviel affair, the sovereign debt crisis in 2011, and the market dislocations at the start of the Covid crisis, was undoubtedly selected by the council precisely for his experience of the crisis. His first project will be to navigate the group through the turbulence.
When Frédéric Oudéa announced that he would not be a candidate for his succession last May, the seeds of the crisis were already there: Russia had launched its invasion of Ukraine three months earlier; the rise in prices was beginning to take a lasting hold in the landscape, forcing central banks to change their tune; Brexit was consummated and China was already partly isolated. But the events that have occurred since have only reinforced the crisis scenario.
Manage the crisis
Faced with the violence of inflation, which broke through the historic 10% mark in the euro zone in September, the European Central Bank (ECB) went into panic mode, raising its rates by 0.50% in July, then 0.75% in September. A similar move is expected in October. Problem for the banks: they were desperate to see rates finally rise after a decade at the bottom, but the speed of the movement – similar to a shock – seriously threatens their balances.
Suddenly faced with unprecedented increases in energy bills, businesses and households that have taken on massive debt at low cost in recent years may find it difficult to repay. From the SME which has taken out a loan guaranteed by the State (PGE) to the industrial group indebted on the markets, the bankruptcies which had disappeared during the Covid crisis thanks to the intervention of the States, are likely to restart sharply.
Potentially more serious, the market correction that has been taking place since the beginning of the year, and has accelerated in recent days with the fall in technology stocks or the attack on the pound sterling, threatens to contagion and lead to losses in banks’ portfolios and balance sheets. A repeat of 2008 or the sovereign debt crisis is all but excluded. The disaster scenario for a bank…
Ensure group cohesion
While crisis management will necessarily be Slawomir Krupa’s priority, maintaining group cohesion will be just as decisive. Pure product of Societe Generale, where he arrived 25 years ago, he knows the group in depth. But his background as an investment banker is both his strength and his weakness: if he is a star of the trading rooms, he is more or less a clean sheet for the staff of retail banking agencies.
The tensions that marred the last weeks of the appointments process will leave their mark. His unfortunate rival, Sébastien Proto, could decide not to stay. But those who supported him in the heavy process of merging the Societe Generale and Crédit du Nord networks will perhaps take the brunt. Especially since Slawomir Krupa, whose direct style could surprise some, should not delay before imposing his discipline in terms of costs.
Integrate LeasePlan
The third challenge for the 48-year-old future boss will lie in the implementation of the strategic decisions taken by the group in recent years. This will include completing the merger of the networks in retail banking, supporting the growth of Boursorama, which has just acquired 310,000 customers from ING, but also successfully integrating LeasePlan, the rental specialist of long-life vehicles, which is to merge with the listed subsidiary ALD.
This acquisition – the largest in Societe Generale’s history, at 4.9 billion euros – is the subject of an investigation by the European Commission’s competition directorate. The latter could decide to carry out an in-depth investigation, which would force the group to proceed with disposals and would jeopardize the timetable for the operation, which is expected to be finalized by the end of the year. A lesser evil in times of routine, but an additional concern in times of heavy weather.
Investors, eager to see Societe Generale progress on the stock market, seem as convinced as the board of directors that Slawomir Krupa will be able to meet these multiple challenges. On Friday, the stock rose 1.4%.
