Industry before banking
The history of Societe Generale’s first steps in Russia.
In 1872, barely nine years after its creation, Societe Generale (for encouraging the development of business and industry in France, to translate its full name) turned to Russia. However, unlike the heads of Crédit Lyonnais, whose interest in Russia was focused on traditional banking, Societe Generale’s leaders wanted to establish themselves as investors by backing the development of the country’s metal and iron industries. To start with, they headed the Société minière et industrielle which was in charge of canalising the Moskova river and of the Donetsk coal seams.
In 1897, the Group created another subsidiary: Société Générale de l’industrie minière et métallurgique en Russie, also known as Omnium. This company rapidly became the largest producer of coal and metal in southern Russia. This led to Societe Generale taking stakes in other industrial companies, such as Routchenko or Makievka. The Group’s banking business was limited to investing the securities of these industrial companies and granting them loans for business development.
The art of diplomatic relations between France and Russia
At the end of the 19th century, tsar Alexander III and his successor, Nicolas II, decided to set Russia on the road to modernisation, notably via economic development.
In order to finance an industrial renovation and the construction of a communication infrastructure, Russia’s political leaders decided to borrow capital from the international markets. The first Russian loan was launched in December 1888 and the last in December 1913.
France, as Russia’s main ally at the time and keen to strengthen diplomatic links between the two countries, played a leading role in placing Russian government debt. To do so successfully, the various French governments between 1888 and 1914 relied on the support and expertise of the major French banks, including Societe Generale.
In 1909, the Group managed subscriptions totalling 340 million francs (equivalent to around one billion euros), which represented almost 21% of the total. Societe Generale was therefore in second place, behind Crédit Lyonnais and in front of Paribas and Comptoir national d’Escompte, which would one day become BNP.
As a result, in the late 19th and early 20th centuries, Societe Generale extended its role from an industrial company to a merchant bank. It would soon add a third string to its bow: retail banking, with the creation of Banque du Nord in 1901.