The much-anticipated sale of Societe Generale Equipment Finance (SGEF) remains on-track with today’s announcement that Societe Generale has signed a memorandum of understanding with Groupe BPCE.
As part of the proposed acquisition, Groupe BPCE will take over most of SGEF’s activities, except for the Czech Republic and Slovakia which will remain part of Societe Generale.
SGEF is one of the European leading providers of industrial equipment lease financing through a diversified range of equipment financing solutions and associated services. Its international footprint in 25 countries is based on a network of partnerships with vendors and banking networks. With its 1,600 staff, SGEF posts annual new business volume of more than €6 billion and a global outstandings amounting €15 billion.
Odile de Saivre, Chief Executive Officer of Société Générale Equipment Finance commented: “As part of the Société Générale group, SGEF has developed its business internationally and built up a unique geographic footprint. SGEF’s staff are recognised experts who work with our clients and partners to construct innovative equipment financing solutions. I am pleased that this project with Groupe BPCE is set to open a new growth-oriented chapter, thanks to the strong fit between our activities”.
Today’s announcement, however, raises some interesting issues about the future strategy of Societe Generale.
Banks are once again focusing on low margins returned by some asset finance subsidiaries. They do not compare favourably with alternative uses for their scarce capital. As Bill Stephenson, Global CEO of PEAC Solutions pointed out recently to AFC, they are often the last mouths to be fed by bank owners.
This topic will be discussed in-depth at the inaugural AFC Leaders Summit Europe next week in Brussels.
While Stephenson is in favour of raising margins and taking a bolder position on residual values, this strategy is unlikely to be popular at banks who have an uneasy relationship with asset finance practitioners, and with the idea of taking much if any residual value risk.
Residual value risk is a particular concern when it comes to funding green assets, so it is interesting that, whilst Societe Generale has decided to sell SGEF, they have made their vehicle leasing and fleet management operation, Ayvens, a core pillar of its future strategy.
Societe Generale’s focus on fleet was announced when used car prices were very high - due to the pandemic and disruptions to the supply of new cars. Margins were excellent. Following the acquisition of Leaseplan by ALD Automotive, the business rebranded as Ayvens, the largest fleet finance company in the world.
Mobility with its potential to embed finance in high margin services is seen as a core opportunity for banks, but there are growing concerns about concentration risk on BEVs.
Unlike SGEF, the prospective acquirer – Groupe BPCE – does not have an extensive international network but is trying to develop one. BPCE is a bank operating nationally within France (in the main) formed out of the merger of Banque Populaire and Caisse d’Epargne in July 2009.
Groupe BPCE ranks second in France’s equipment leasing market through the BPCE Lease subsidiary managed by Didier Trupin. With the project to acquire SGEF, Groupe BPCE will expand its footprint in Europe and become the European leader of equipment financing solutions (in terms of outstandings, excluding auto) for manufacturers, dealers, vendors and corporate customers.
SGEF’s specific expertise in the transport, industrial, technology, medical and renewable energy sectors provide a strong fit with Groupe BPCE’s leasing activities in France, as well as in Italy and Spain.
The Group has said that they will continue to serve all the regions that SGEF already serve.
Nicolas Namias, Chief Executive Officer of BPCE noted that the project will further BPCE’s international growth ambitions, diversify its revenues and enhance its ability to create value: “The choice of investing in this growing business serves the goal of financing the real economy, strengthens the Group’s offering for the energy transition and the real economy, and is consistent with our cooperative nature.”
SGEF’s vision to be "the worldwide partner for integrated equipment solutions creating sustainable and positive impact for the planet" has been embraced by BPCE who acknowledge that the acquisition will support BPCE’s energy transition.
Namias added: “We have ambitious growth plans for SGEF, its clients, and its vendor and bank partners, and have full confidence in being able to execute them by leveraging the recognised talent of SGEF’s management team – particularly that of its Chief Executive Officer Odile de Saivre - and of its staff, for the benefit of all Groupe BPCE stakeholders and particularly for customers of the Banque Populaire and Caisse d’Epargne networks.”
So, BPCE seem to be buying not only the international reach of SGEF, but also some of its key talent.
