SG Paribas 'good fit for Europe'
Jacques Philippe Marson talks to IPE The green light has been given to Jacques Philippe Marson head of Paribas Global Securities Services to drive forward the global securities services business at the combined operations of Paribas and Société Générale, as the two come together to create the world's fourth largest bank in equity terms.
Marson has been given the job of running the area, which has been given priority for expansion. I am proud to have been confirmed in my position to run the combined network .
The securities services was one of the business areas where it was decided up front to go for development," he says.
The emphasis is European: "The strategy I recommended for Paribas is going to be pursued - this is primarily and totally a European strategy."
In this, Paribas has had something of a head start over the other French groups, with the aquisition of the JP Morgan European multi-direct clearing and custody network in 1995. As with a number of other European groups, Soc Gen probably missed out on this, in Marson's view, and were faced with the task of "building themselves what they were not able to buy".
As a consequence, Paribas goes into the merger with a custody business mix that is radically different to Soc Gen's. "From 1995 to the end of last year, there has been a significant growth in Paribas' business outside of the domestic market to a point where today the French market is less than 45% of the total assets and clearing activity we have in the European zone." The Soc Gen securities services business is around 90% domestic and 10% external. Marson rejects any suggestion of business overlap in his area of business between the two groups, and indeed in the merged groups' overall business."One of the big advantages of the merger generally is that there is complementarity and lack of overlap." Within France a significant proportion of what SocGen provides in securites services is serving retail investors, which is something that Paribas did not do, being virtually institutional, he points out. But even outside France, the fit between the two is pretty good.
"SocGen brings clearing capabilities within the UK and Switzerland, which are two major holes in the Paribas network. Not only are these holes filled, but it brings access also in the US and Japan."
"The new group will hold the dominant position in the French market," says Marson, as Paribas had ranked as number one ahead of CDC and Soc Gen had been in third position. "CDC is a very sizeable and respected player, but it is owned publicly and still enjoys some of the privileges of its particular status.
It is a competitor we respect in France and while it has a European strategy, I believe it is difficult for a publicly owned entity to compete with privately owned instiutions, particularly those servicing privately owned clients."
Then there is the "second tier", in his view comprising among other Indosuez, Credit Lyonais and BNP. "It is certainly a clear change in the French landscape," he says. The French market players as other European players are going to have to decide on their "metier" when it comes to custody, as Marson puts it.
"It takes a certain critical mass to be comfortable about competing, certainly in the French market, but also a credible size is needed to compete in the European market." Marson believes the group has the complemantarity needed in different markets and client types, as well as the size. "We will have £1trn ($1.5trn) in assets under custody, which pushes us into sixth position in worldwide terms."
In the global picture, he acknowledges that "we are geting close to being in the second tier", but in European terms it is a different story. Paribas' business is Europe diversified. "One of our strategies is to help world-wide investors to get into European markets efficiently," he says.
"But we have a true global dimension in terms of key major markets now." He adds: "European investors are less well diversified in their investments , so if you cover 40 to 45 markets, you cover pretty well 100% of their needs. US investors are probably in double that number".
"One of the key messages we want to deliver to our clients is that we will be the instiution that will help them go through the bumpy road of structural change in the European market." He believes it is necessary to be proactive in helping these structural changes along as there is no point in fighting rear guard actions to resist the forces streamlining European markets. He is pleased with the activities that Paribas undertook in preparing the market for the arrival of the euro. "As a result, many institutions have moved their business to us."
Having worked with State Street for a number of years, Marson has no illusions about the firepower of the US groups and the inroads they will make in European markets. The huge base of assets they have in their domestic pension fund markets gives them an incomparable headstart. But he takes comfort from history. "If you compare Paribas in terms of asset size of the capitalisation of the market which we operate in and go back perhaps 10 or 15 years, we are as they were then in the US vis a vis an equivalent size of the market. I think it will be a natural market evolution that we can count on." Fennell Betson"