BNP rules out bid for Societe Generale

   PARIS, March 20, 2008 – French banking giant BNP Paribas said on
Wednesday it had dropped any idea of a bid for Societe Generale, another
leading French bank rocked earlier this year by the biggest-ever rogue trading
scandal.
   Analysts said Societe Generale was now highly unlikely to attract
alternative bidders, domestic or foreign, at least until the crisis on
financial markets subsides and the troubled French bank has published first
quarter results.
   "Given persistent rumours (of a bid), BNP Paribas wants to make clear that
it is no longer looking at proposals for a tie-up with Societe Generale," BNP
Paribas said in a statement.
   "The conditions allowing a value-creating operation for shareholders are
not in place," it added.
   BNP Paribas had revealed at the end of January that it was looking at
Societe Generale after its rival announced trading losses of 4.9 billion euros
(7.7 billion dollars) arising from allegedly unauthorised trading for which
one of its traders, Jerome Kerviel, is being investigated.
   There was speculation at the time that the French government would favour a
takeover by BNP Paribas to head off any foreign bid.
   Shares in BNP Paribas rose 4.56 percent to 60.71 euros in early afternoon
trading in Paris on Wednesday as investors showed relief at the end of the bid
speculation.
   SocGen shares, in contrast, tumbled as BNP’s statement removed the most
frequent source of bid speculation.
   "BNP are right to give up on this," one Paris-based dealer commented,
asking not to be named.
   "They must have realised it was killing their share price and that, given
the major overlaps in the two groups’ businesses and the current economic
environment, there’s no point taking the risk," he commented.
   Oddo Securities, a brokerage, cited overlaps in corporate and investment
banking, major execution risks and the fact that the merger would be unlikely
to generate profits in the first five years.
   One major barrier to a BNP-SocGen tie-up was the prospect of major job cuts
in French retail banking, which would have created strong opposition from
unions and politicians, analysts agreed.
   "As we thought since the beginning, the conditions for a takeover of SG by
BNP were not in place," Odoo Securities said in a note to its clients.
   Analysts also gave short shrift to the idea of any bank making a move for
SocGen in the immediate term.
   "There is no bank at the moment that is able to bid for SocGen," said an
analyst at German bank LBBW, Ingo Frommen, stressing that "all the banks have to keep money in their pockets."
   "As long as the (financial) crisis goes on, I don’t expect a bid for
SocGen," agreed another sector analyst.
   Credit Agricole has been cited as an option for the domestic solution
sought by the French government, with rumours circulating about either a full
takeover bid for SocGen or a carve-up in conjunction with BNP.
   The other domestic solution touted in recent weeks, namely a tie-up with
state-owned Banque Postale, has been rejected by finance minister Christine
Lagarde.
   Market watchers also dismissed the idea of a short-term bid for SocGen from
Italian peer Unicredit, which last year held tie-up talks with the French bank.
   "Speculation had focused on Unicredit but it has said it’s going to
concentrate on Capitalia first," the dealer argued.
   Unicredit merged with Capitalia on October 1.
   Of the other rumoured candidates, Intesa Sanpaolo has already ruled out any
offer for SocGen, while Banco Santander has said it is definitely not
interested.
   In addition to awaiting an improvement in market conditions, market
watchers argued, any future bidders for SocGen will likely also hold fire at
least until after the bank reports first-quarter results.
   "I think now SocGen’s published its (full year) results, any candidates are
going to sit back and see how it gets on for the next couple of quarters at
least before making a move," the dealer commented.
   "1Q08 results are likely to be on the weak side … which could renew
speculation on a potential friendly link," KBW analysts said in a note to
clients.
   Societe Generale last month raised 5.5 billion euros in fresh funds to
cover the trading losses and restore confidence in its balance sheet.