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Oct 12, 2023

French market says quoi?! to Société Générale – but it’s no fault of the IR department

The incident exposed the gap in expectations between investors and the bank

Top of mind this month has been the furor surrounding Société Générale’s (SocGen) strategic update, which was shared with the market at the firm’s investor day on September 18.

The French bank’s stock tumbled more than 12 percent on the day as the markets reacted with an emphatic quoi!? as the gap between shareholder and corporate expectations became clear.

But what was classed by many in the market as a failure of investor relations seems – to me – to be a bit of a misreading of events. And that’s not just because I’m feeling defensive of our noble readership.

Not that there wasn’t any bad news for investors. As Patrick Jenkins wrote in a recent Financial Times column, the writing should have been on the wall: European banks are still facing the nasty headwinds that led to so many smaller institutions collapsing earlier this year, and SocGen is still trying to compete with Wall Street giants when it comes to investment banking.

But maybe there’s more to this. For one thing, new boss Slawomir Krupa has already made it clear he intends to spend his first year in office broadening SocGen’s investor base, which is dominated by passive investors and domestic French money. He and the bank are off on a US roadshow to do exactly that.

While the shift in stock price will have raised some eyebrows, it plays into Krupa’s likely narrative that SocGen is vastly undervalued. It also should serve as a trust-building exercise: he’s been honest with investors already, so what comes next is likely to be more of the same.

The criticisms also fall into the age-old problem of holding the IR department responsible for the share price. That correction was probably long overdue, and what we saw this week was a reversion to the mean rather than an abject failure.

It’s exactly that gap between shareholders’ and the bank’s understanding that has persuaded more and more European banks to stage an investor day this year. Maybe the same will be true for companies across the continent? Luckily, data from the upcoming IR Magazine Global Roadshow Report, due to be published before the end of the year, will illuminate further.

What were your takeaways from the whole debacle? Let us know, either by emailing or following our latest discussions on LinkedIn.