French banking giant Societe Generale today announced the settlement of US and French legal actions for allegedly rigging the Libor benchmark rate and for questionable transactions with Libyan parties, as reported interest in a merger from Italys Unicredit boosted demand for shares.
The settlements will be within the €1bn (£870m) provisions the bank has already set aside for the two probes, SocGen said, subject to judicial approval.
In March SocGens deputy chief executive was forced to quit the bank, with the investigation into rigging of the money market benchmark London Interbank Offered Rate (Libor) reportedly a key reason for his departure.
Read more: Hedge fund reports Unicredit for allegedly breaking European banking rules
On the Libyan front SocGen last year paid €963m to the Libyan Investment Authority, which had accused it of corruption.
The settlements remove an obstacle to the reported plans by Italian banking group Unicredit to pursue a merger with SocGen to create a European banking behemoth.
Shares in SocGen rose by 1.5 per cent at the time of writing, but shares in Unicredit fell by 0.63 per cent, amid share price falls across Italian financial assets.
Analysts agreed on the logic for the move, reported by the Financial Times, but questioned whether a merger could happen in the near term.
Read more: Societe Generale share price falls as bank reveals divisional drops
The report “does not come completely out of the blue”, according to analysts at Jefferies investment bank. However, political instability in Italy and regulatory unease over the size of the two banks are “a significant hurdle to deliver an attractive deal”.
Both banks are global systemically important banks, meaning authorities are likely to scrutinise any merger deal closely for risks to the European financial system.
If the banks were to go forward with any plan to merge it could also face political opposition unless concerns over foreign ownership of a key Italian business were addressed.
Read more: Societe Generale deputy chief executive exits over Libor dispute
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