SG expands Italian derivatives business

SG, the investment banking unit of French bank Société Générale, has expanded its institutional derivatives sales force in Italy by merging its equities arm with its interest rate and credit divisions.

David Armstrong will lead the new department as head of Italian institutional derivatives sales. He was previously head of institutional equity derivatives sales in the country.

SG has a strong equity derivatives background - the Paris-based investment bank was rated either first or second for every equity derivatives category in Risk's inter-dealer rankings this year (Risk September 2004). But it is relatively weaker in credit or interest rate derivatives.

Armstrong sees the reorganisation as an opportunity to redress this situation. “Our client base in equity derivatives is something we can exploit in other areas as there are a lot of synergies available,” he said. But he stressed the move was not a result of poor performance from one side of the business. “It is not that we are weaker on one side of the business and that that justifies our choice of joint venture. It would make sense anyway,” said Armstrong.

SG’s Italian client base is mainly made up of product distributors and proprietary investors, client types that Armstrong sees as having very different needs. “We believe, however, the frontiers between the various classes of products are receding. We see our Italian project as an opportunity for an expansion of hybrid products,” he said.

The Milan-based team, which he is looking to expand from 16 staff to 20 in the near future, will have both sales staff and a transactional engineering team that will develop hybrid solutions between asset classes. “I think it’s a good move to approach our clients with a larger toolbox of instruments at our disposal,” said Armstrong. He added that collateralised debt obligations with equity participation and callable equity structures are early examples. "We need to go further into the links between equity, credit and interest rate risks,” he said.

Armstrong cited BNP Paribas and JP Morgan Chase as his main competitors, but stressed that many other banks were entering the market. “They have a weaker position,” he said, “but if you add all the newcomers together, it’s certainly a more guarded market.”