1. Pair Trade: Long SocGen - Short Crédit Agricole
Wednesday, October 10th 2012
Company Description Investment Case
Societe Generale (GLE FP) – Core Tier I improved by 50bp to 9.9% at
the end of Q2, due to retained earnings, strict control of RWAs and
balance sheet deleveraging. CIB deleveraging is progressing.
Refinancing needs for 2012 have been more than covered. SocGen
announced in August that it agreed to sell TCW Carlyle and TCW
management. This should release some Basel 3 capital in 2013.
Additionally, it confirms:
Societe Generale (GLE FP)
 Management´s commitment to deleveraging;
Last Price (€) 22.97
 Execute business disposals and simplify its set up;
YTD Change 33.33%
 Focus resources on core activities.
Mkt Cap (€bn) 17.899
Credit Agricole (ACA FP)
Management delivery on the announced deleveraging plan and the
Last Price (€) 5.771
reduction in legacy asset exposures should improve investor
YTD Change 32.36%
sentiment and release capital. However, profitability will probably
Mkt Cap (€) 14.416 remain low in the next few years. The bank continues to reduce its
Source: Bloomberg
liquidity needs.
Analysts Recommendations: Since August, Credit Agricole (ACA FP) has risen due to increased
market focus on the probably lower than expected exit cost to
disposing its Greek unit Emporiki bank. The management said that a
deal should be signed “within weeks”. After that, Credit Agricole will
become more plain vanilla. Capital seems to be below peers and
should probably remain a hurdle. The bank has been able to reduce
its loan to deposit ratio at Q2 (113%). Stated core Tier I was 9.6% (Q1
2012: 9.4%). RWAs down 2% QoQ. Group deposits +2% YTD.
Source: Bloomberg
The Societe Generale/Credit Agricole has a current ratio of 3.98. We’ll
Market Multiples define as our target 4.40. We would use 3.80 as our stop loss level.
P/B 2013 ROE 2013 DY 2013
Est. Est. Est. Technical Comment
SocGen 0.38 6.14% 3.87%
Credit Agricole 0.31 5.49% 4.31%
Source: Bloomberg
Next Report date
SocGen Q3 Results November 8th
Credit Agricole Q3 Results November 9th
Source: Corporate Websites
www.fincor.pt
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