Daniel Bouton, chairman and CEO of Société Générale, discusses in detail his bank’s culture and strategy with Euromoney’s editor, Clive Horwood.

Can Bouton’s unique vision drive SG forward?

Can Bouton’s unique vision drive SG forward?

Daniel Bouton, chairman of Société Générale, plays the game by his own rules. He doesn’t believe that to be a successful investment bank you have to be a global player with a franchise in almost every market. He won’t be rushed into acquisitions. And he thinks that French banks have an exciting story to tell. Having put potential high-growth markets such as equity derivatives and emerging Europe at the heart of his bank’s engine room, is he about to turn the accepted wisdoms on their head? Clive Horwood reports, with research by Lawrence White.

Stan O’Neal’s story is unique in investment banking. Born in Roanake, Alabama (because his home town’s hospital refused to serve African Americans), raised in Wedowee (population 750), he was educated in a schoolhouse built by his grandfather, who was born a slave. O’Neal’s father moved his family from the cotton fields to Atlanta, where he worked on a General Motors assembly line. Stan O’Neal worked there as a teenager but GM spotted his strong intellect and sent him on a scholarship to the GM Institute, where he gained a degree in industrial administration. He then took an MBA in finance at Harvard, graduating in 1978.

What lessons did Stan O’Neal learn from the restructuring of Merrill Lynch at the turn of the decade? What are Merrill’s plans in mortgages, private equity and asset management? And what continues to drive Merrill’s CEO forward? O’Neal reveals all to Clive Horwood in his first in-depth interview since becoming the firm’s chairman and CEO.

When Stan O’Neal took over as president and CEO of Merrill Lynch in 2001, the thundering herd of the 1990s was clapped out. O’Neal imposed a ruthless cost-cutting strategy that saved the firm’s independence. Now his rebuilding plans are starting to bear fruit. Can Merrill heed the lessons of the past, but at the same time make it back to the pinnacle of investment banking? Clive Horwood reports.

Banco Itaú expects regulatory approval next month for its planned takeover of Bank of America’s BankBoston, a subsidiary of the former FleetBoston. In return, Bank of America will take a 6% stake in Itaú, valued at $2.2 billion. The deal adds $9.7 billion in assets to Itaú’s balance sheet, making it the largest private lender in Brazil. Itaú will also gain BankBoston’s 66 branches and 200,000 clients. Meanwhile, Brazil’s equity markets have erased nearly six months of gains on fears that rising US interest rates will draw investment away from emerging markets.

The real test of Goldman Sachs’s new model will come in a prolonged downturn.

Ever since Kuwait amended its banking legislation in early 2004 to license foreign banks, outside players have continued to show confidence in a high-potential market.

The recent sale of the first Islamic compliant securitization originated in the US is likely to open up a new source for the sukuk market, bankers believe.

Less liquidity in equity markets suggests that investment strategies harnessing volatility are appropriate.

Jürgen Stark has taken Otmar Issing’s seat but Issing’s old role has been split, reinforcing collegiality on the board.

Too few fund managers are paid to make asset allocation bets. That creates opportunities for those that do.

As stock exchange consolidation catches on around the world, it’s sobering to note the lessons of the Australian experience.

Bradford & Bingley’s treasurer, Peter Green, and head of capital markets and securitization, Mark Winter, want to regain ownership from investment banks of their institution’s dialogue with investors. They are following a simple strategy of diversifying the investor base. Allied to a remarkable level of transparency during the printing of new issues, this is already reaping its rewards. Alex Chambers reports.

Argentina’s central bank president reckons that it will take at least another two or three years before his country’s economic variables normalize. Martin Redrado says that although Argentina has made progress since the 2001/02 financial crisis, more patience is needed before it can achieve sustainable growth.

Investors might be keen to get out of Latin American assets right now, but that doesn’t mean they’ve fallen completely out of love with Brazilian debt. The Brazilian government tried to take advantage of the turbulent markets by announcing a $4 billion tender offer in June; the offer was a spectacular failure, attracting just $1.2 billion in bids.

Alan García’s victory over Ollanta Humala in Peru’s presidential elections left Venezuelan president Hugo Chávez seething. Peruvians rejected the populist Humala, who sought to distance himself from Chávez’s anti-American rhetoric despite having received the Venezuelan leader’s uninvited backing. Chávez threw insults at García, calling him “a thief, a demagogue, a liar”. García reiterated his support for democracy and free trade, shooting back a barb of his own: “The Chávez phenomenon is militarism with a lot of money.” It is a stunning metamorphosis for the former socialist president whose first term in the 1980s ended in hyperinflation and a terror campaign by Shining Path. Nevertheless, Lima’s financial community remains worried by García’s plans to renegotiate Peru’s free trade agreement with the US.

Foreign institutions considering an M&A foray into the financial services sector in Asia might want to pick up a copy of PricewaterhouseCoopers’ recent report on the matter before doing so.

New fund gives access to 1,353 listed companies on Shanghai and Shenzhen’s markets, compared with 118 H-share stocks and 88 red chips.

If you’re fed up with the poor performance of Asia’s equity markets recently, but still have a strong stomach for risk, consider Vietnam.

If Latin IPOs had a resurgence until a couple of months ago, so did structures that were either untried or hadn’t been used in years.

ScotiaBank, Canada’s third-largest bank, has announced its C$330 million takeover of Banco Interfin, the largest bank in Costa Rica. The two banks will merge through a public share offering, bringing ScotiaBank’s Costa Rican market share up to 13%.

Simplify, simplify, simplify. Thoreau’s mantra is good advice for rating agencies when it comes to allocating equity credit.

Equity-linked bankers are among the very few people who actually like to watch markets fall. This is because depressed equity prices and elevated volatility help to make convertible bonds a lot more attractive, especially given the rising interest rate environment.

The recent popularity of bank balance sheet CLOs, ushered in by ABN Amro, HSBC and Barclays Capital at the end of last year, shows no sign of abating. In June alone, RBS, Deutsche Bank, BNP Paribas, Commerzbank, Standard Chartered and Sampo were all in the market with deals. These are straightforward balance sheet and regulatory capital management exercises in the run-up to Basle II and as such tend to be large, one-off exercises. Both synthetic, RBS’s Arran Corporate Loans CLO is £3.5 billion equivalent and Deutsche’s London Wall 2006 deal is €3 billion. BNP Paribas’s Global Liberté V is predominantly backed by lending in the US and Canada and is $12 billion while Commerzbank’s CoCo Finance 2006 is a €4.5 billion trade. Standard Chartered’s latest balance sheet CLO references $1.6 billion of loans, and Sampo’s €1 billion Sea Fort Securities is the first CLO from a Finnish bank.

The structured credit market has truly come of age. The correlation meltdown of 2005 spurred a new round of innovation, and shook out the weaker players. A new willingness on the part of investors to buy every part of the capital structure has encouraged the creation of a new suite of products, with more to come. However, with these new products come new risks. Now, more than ever, choosing the right manager is crucial.

A government committed to reforming Portugal’s public sector has also shown that it cares about capital markets. A recent 30-year bond issue signalled a new focus on developing the yield curve and a new covered bond law promises benefits for both issuers and investors.

When Euromoney's journalists were able to do a bit of work between World Cup matches in June, football was never far from our minds. And so it was, as we decided this year's winners of the awards for excellence, that we hit upon a related idea: if investment banks were countries in the World Cup, which would they be?

“Is that ABN Amro doing badly? I noticed they’re using a minicab firm. It’s always a sign that a bank’s in trouble when they use minicabs rather than licensed cabs”

Citigroup’s global head of fixed-income capital markets, Marwan Marshi, left the bank last month to pursue other interests. Marshi, who worked at Citigroup for 20 years, was previously co-head of credit markets alongside Chad Leat until last year when Leat was promoted and gained control of credit trading as well as credit origination and products. Citigroup is not appointing a replacement in Marshi’s role, which had become increasingly redundant. The regional heads of origination that reported to Marshi now simply report to Leat.

Efforts to launch a CMBS index in Europe have foundered, so the proponents of the product have now decided to abandon the original project and start again.

The global strategists at Société Générale, who must be doing something right. The team rose from 24th to second place in the Extel Survey this year, knocking Smith Barney Citigroup into third place. Dresdner Kleinwort Wasserstein took the top spot again.

The equity market’s violent reaction to seemingly innocuous data has puzzled many commentators. At first bond investors reacted much more calmly to inflation fears but subsequently they seem to have been infected by the equity investors’ pessimism.

Are the much-hyped credit derivative product companies now lining up to launch relying on an arbitrage that is dangerously close to disappearing?

Greater liquidity is expected to flow into the Russian debt markets after the country’s president, Vladimir Putin, successfully pushed for rouble convertibility to be brought forward from January 1 2007 to July 1.

This year was shaping up to be yet another record-shattering year for Latin American IPOs but a sharp stock market correction in May and June put paid to any such hopes. Many IPOs have been cancelled over the past couple of months, and the few that have come to market have struggled out of the gate.

Emerging markets have not responded well to the recent wobble of international stock markets. But if IPO activity can be considered as an indicator for economic expectations in a market, investors still have plenty of confidence in wide-ranging growth in Russia.

The first securitization of US home equity loan risk to be denominated in euros came to the market at the end of June via Countrywide Financial.

Kuwait’s largest project financing to date closed on June 14.

Hungary’s fiscal weakness has rating agencies worried. Even before the mid-month downgrading of Hungary’s sovereign debt, Budapest’s equities markets began to adopt the same gloomy outlook as Standard & Poor’s. The government’s debt levels are on track to exceed 74% of GDP by 2009, up from 60% at current levels. High deficit spending is expected to fall just barely, overshadowing noble efforts on the part of Hungary’s socialist-liberal government to consolidate its finances. Central bankers notched up rates by 175 basis points to bolster the forint and stave off inflation risk. This, combined with a tax increase, could significantly hurt growth prospects.

The panel for the second session at Standard Chartered’s China and Africa forum had already faced some tough questions on poverty and corruption, so they must have been uneasy when the Standard Chartered banker who popped up at the last minute took an even tougher line.

29 the percentage of asset allocators describing themselves in Merrill Lynch’s Fund Manager Survey as overweight. The figure is one of the highest ever recorded by the survey.

In an interesting reversal, Robert Palache is to join Morgan Stanley, the firm from which he poached a high-profile three-man CMBS team in 2003. At the time Palache was head of real estate, corporate securitization and infrastructure finance at Barclays Capital, and hired Lynn Gilbert, Christian Janssen and Natalie Howard from Morgan Stanley’s CMBS team to build up its CMBS Conduit, Eclipse. Now Palache, who walked out of BarCap in March this year, joins Morgan and reports to John Hyman and Ellen Brunsberg, the woman from whom he poached Gilbert and team in 2003. In his new role, Palache will focus on further developing the bank’s securitization origination business in Europe in areas such as infrastructure, whole business and new asset securitizations.

Hot on the heels of its highly successful $11 billion IPO in Hong Kong, mainland Chinese state-owned Bank of China is listing in Shanghai, raising an additional $2.5 billion.

In the June edition of Euromoney, our story ‘Spac probe hits wall of silence ’ contained a quote wrongly attributed to Floyd Wittlin of Bingham McCutchen. Our apologies to all concerned.

Self-made billionaire Mark Cuban, who bought basketball team the Dallas Mavericks with proceeds from the sale of his shared company Broadcast.com to Yahoo!, is launching a website aimed at exposing corporate fraud.

The primary equity market is the latest victim of the sustained falls in stock markets around the world, now into its second month.

“With more traditional managers setting up hedge funds in order to compete, and the general convergence of hedge funds and traditional asset management I think we’ll see ‘hedge funds’ becoming a strategy rather than an industry.” So says Niall Cameron, head of traded markets at ABN Amro in London.

Euromoney’s Global Borrowers and Investors Conference last month brought the great and the good of the world’s fixed income markets together in London for the 15th year in a row.

The cost of raising tier 1 capital has increased on both sides of the Atlantic, but there might be light at the end of the tunnel.

Little-known London-based Cheviot Asset Management has poached 50 investment management professionals from UBS and other leading investment firms as it relaunches itself as an independent private client asset management group.

High net-worth individuals (those with more than $1 million in financial assets) increased their wealth by 8.5% in 2005, according to the 2006 Capgemini/Merrill Lynch World Wealth Report. And the number of HNWIs rose by 6.5% to 8.7 million.

An e-mail has been circulating, purportedly detailing certain phrases unlikely ever to be heard in any sell-side FX trading room. In no particular order, they are:

Rumours are doing the rounds that an extremely large North American pension fund has taken a big hit in FX.

A sharp sell-off in the Turkish lira illustrates once again that there’s no such thing as a free lunch in the FX markets and has left speculators well and truly plucked.

The CME has announced plans to list futures and options on Chinese renminbi against the US dollar, euro and yen.

With some institutional investors still indecisive about allocating investments to hedge funds, and some still struggling to get to grips with portable alpha, it’s a relief to know that others are so ahead of the curve that they are putting the two elements together.

It seems no business is too small as the leading sell-side players look to increase their FX trading volumes. ABN Amro is the latest bank to join the fray.