CIB Gets a Boost from Trading Talent
In 1997, Societe Generale's CIB contributed just €151 million to the group's net income of €933 million, barely 16 percent. Then, in 1998 the CIB recorded a loss of €67 million as global markets suffered from the liquidity and volatility backlash from Russia's debt default and the collapse of Long Term Capital Management (LTCM). In 1999, shortly after Daniel Bouton was elected chairman of Societe Generale in addition to his role as CEO, the CIB received a boost from the promotion of Jean-Pierre Mustier from head of international equity options trading to head of fixed income, FX, commodities, and derivatives. Over the previous 10 years since joining Societe Generale, Mustier, aged 38, had gained high internal recognition for building a profitable equity derivatives trading business. CIB's earnings over the next four years proved Mustier's mettle. In 1999, CIB's net income jumped to €708 million, 35 percent of Societe Generale's worldwide net income, and over the next three years CIB accounted for 36 percent of Societe Generale's €6.2 billion cumulative net income, amounting to €2.3 billion. Mustier's contribution to this impressive performance earned him promotion to the position of CIB's global head and membership in Soci6t6 Generale's Executive Committee.
Now all under Mustier's leadership, Societe Generale's CIB began to deliver ever-higher profits. In 2003, its net income rose to €1.1 billion, which was 46 percent of the group total, followed by €1.4 billion in 2004, €1.8 billion in 2005, and €2.3 billion in 2006. Consistent with Mustier's demonstrated abilities, CIB derived a higher proportion of its revenues from trading than previously. In 2000, trading had accounted for 23 percent of CIB revenues. During the next six years, the percentage averaged 30 percent. This performance was made possible by a rapid expansion in the number of traders CIB deployed and the markets in which they were active. However, as the investigation into Kerviel's unauthorized trading later revealed, this growth in activity was not accompanied by a corresponding reinforcement of CIB's infrastructure and controls.