Sebastien Danloy talks to GlobalCustodian.com about the plans for Socit Gnrale Securities Services, and how SGSS aims to double profits by 2012.
Despite the financial context of the past three years, the major players in the securities services industry have been waving the cheque-book with vigour. In 2008, JPMorgan bought the institutional global custody portfolio of Nordea, and in 2009 the custody services business of Sydney-based ANZ. In 2009 State Street bought Intesa Sanpaolos securities services business, and in early 2010 Bank of New York Mellon announced it would buy PNC Financial Services Groups investment servicing unit.
Unlike its competitors, Socit Gnrale Securities Services (SGSS) is keen to remain outside the acquisition paradigm, undertaking a business plan that includes joint ventures, commercial alliances as well as traditional acquisitions.
In an explosive few months in 2010, SGSS has been expanding its global reach. In March SGSS and the State Bank of India launched a joint venture offering securities services in India, entitled SBI SG Custodial Services. In June SGSS teamed up with U.S. Bancorp Fund Services to combine fund services across the European and American markets. The move, named the Global Securities Services Alliance, aimed to combine the two firms fund administration and custody services, initially focusing on U.S. clients looking to do business in Luxembourg and Ireland. In July SGSS signed a commercial agreement with National Bank of Abu Dhabi and won the mandate to provide fund services to Credit Suisse (Deutschland) AG, acquiring the legal structure of Credit Suisses Asset Management Kapitalanlagegesellschaft mbh.
We are not pursuing a specific strategy of joint ventures, alliances or partnerships but looking at all the different options open to us, explains Sebastien Danloy, global head of sales and relationship management, SGSS.
Unlike the concrete nature of acquisitions, business alliances give the participants room to point the finger if things do not go to plan. However Danloy is quietly confident on the potential for the U.S. Bancorp deal. Today, we are in a situation where we dont have a product offering in the U.S. and we dont think it would be appropriate for us to have a product offering in the U.S., he says. On the other side, you have U.S. Bancorp, a significant player in the regional market, especially in mutual funds marketplace a top three player in the mutual fund marketplace. But they dont have any presence outside of the U.S. and they have clients who are interested in launching UCITS products in Europe.
If you are a player with a U.S. customer base, whose clients want to go into Europe to set up UCITS products, you dont necessarily have an offering for these clients. The SGSS presence in Europe is second to none and we bring local expertise and know-how to US fund managers. And we are interested in targeting the U.S. investment fund marketplace, because US fund managers are becoming increasingly important in Europe and also we have European clients who are looking to the US or need reporting for their US activities who would benefit from the services of U.S Bancorp. A commercial alliance works when there is a benefit for both parties.
The benefits for a European securities services provider with a strong base of U.S. clients is increasing by the day and SGSS will be able to provide U.S. Bancorp clients with access and administrative support to the European market.
The outsourcing of Credit Suisses German Asset Management fund administration arm saw SGSS add 6 billion to its 62 billion assets under custody. [The] key element is to have a local presence, says Danloy. When we talk about outsourcing it means knowing the local regulations. Having people with in-depth local knowledge is essential. The fact that we have local presence in Europe is clearly an advantage.
According to Frdric Barroyer, chief executive officer for Societe Generale Securities Services Deutschland KAG, The decision process of Credit Suisse is that they had to change their own system, it was getting close to the end of its life-span, and they needed a more robust solution, and we are operating in Germany a strong platform that is very integrated with the font-office modules up to the back office.
Although outsourcing has become a global trend, SGSS has created its own trend in picking up an ever increasing number of OTC derivatives pricing services mandates. Since January 2010 SGSS has won 10 OTC and structured financial instruments pricing mandates, including Santander Asset Management and BT Pension Fund, the largest pension fund in the UK. We have seen tremendous interest in those services and that interest is coming from all types of players – investment banks, asset managers, institutional investors, and we have seen a huge interest in third party valuation, says Danloy.
We can see a lot of prime brokers already establishing fund platforms for hedge fund managers, but we also see large asset management companies starting to do that. We currently service two of the largest platforms in Europe Lyxor managed account platforms and the BoAML platform out of Luxembourg. Our expertise lies in servicing fund platforms, providing all the information to the operator of the platform.
Despite the confidence from SGSS, the financial industry always finds it easier to understand numbers rather than words. In the summer of 2010, Socit Gnrale CEO Frederic Oudea said that companywide profits would double to 6 billion by 2012. According to Danloy, SGSS aims to more than double its own profits by 2012. Such an increase will rely not on stock market trends, but on the success of SGSSs blend of joint ventures, commercial alliances and acquisitions.