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Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

The timing of <a href="https://www.smartkarma.com/entities/societe-generale-sa" target="_blank" data-smartkarma-citation="entities:21478:1" rel="noopener">Société Générale's (SocGen)</a> decision to rationalize its retail banking legal complexity is interesting. Coming just months after posting its biggest loss since the Kerviel affair 12 years ago, the retail network consolidation may make the firm more readily resolvable should it reach the point of non-viability. This is not good news for AT1 investors.Impediments to resolution lower the likelihood of asset stripping. Although reducing these impediments does not increase the probability of resolution, it does nothing to improve the resilience of the firm, which is also needed.With long-duration AT1 notes now favored by investors, SocGen’s recently issued 5 3/8% coupon 2030 first call US$-bond trades tight. SocGen + duration ≠ a good idea.  The longer duration US dollar bonds appear overpriced. We see better value elsewhere along SocGen’s AT1 curve, including the Australian dollar and Singapore dollar notes.

The timing of Société Générale's (SocGen) decision to rationalize its retail banking legal complexity is interesting. Coming just months after posting its biggest loss since the Kerviel affair 12 years ago, the retail network consolidation may make the firm more readily resolvable should it reach the point of non-viability. This is not good news for AT1 investors.Impediments to resolution lower the likelihood of asset stripping. Although reducing these impediments does not increase the probability of resolution, it does nothing to improve the resilience of the firm, which is also needed.With long-duration AT1 notes now favored by investors, SocGen’s recently issued 5 3/8% coupon 2030 first call US$-bond trades tight. SocGen + duration ≠ a good idea.  The longer duration US dollar bonds appear overpriced. We see better value elsewhere along SocGen’s AT1 curve, including the Australian dollar and Singapore dollar notes.

Société Générale AT1: Resolution or Resilience in the Retail Restructuring? Take Shorter Duration

Societe Generale Sa

Société Générale AT1: Resolution or Resilience in the Retail Restructuring? Take Shorter Duration