France’s finest are in far better health than they were last year. SocGen’s third quarter results, released yesterday, revealed a more than doubling of its profit year on year as the corporate and investment bank generated income of €133m, against a loss of €240m in 3Q08.

BNP Paribas also has its investment bank to thank for a strong set of third quarter results, after revenues in its corporate and investment bank rose 43%.

Despite this, big mergers are hanging over the industry like a stubborn remnant of Halloween. This week, La Tribune reported that BNP Paribas was revisiting the notion that it might unite with SocGen.

Separately, Le Monde reported that SocGen was coming round to the idea that it might merge with Credit Agricole.

Both banks have denied any such thing. But the persistence of such rumours – which tend to resurface every 12 months or so – is unnerving for employees in the investment banking arms of BNP and SocGen.

At the end of 2008, the two banks employed 17,318 and 12,611 people in their corporate and investment banking arms respectively. And there were huge similarities between them.

Scary overlaps

“There are massive overlaps between SocGen and BNP’s corporate and investment banks,” says Guillaume Tiberghien, an analyst at Credit Suisse. “It would be a bloodbath,” says another London-based analyst of French banks.

Fortunately, both analysts think a merger unlikely. “BNP is already one of the largest banks in the world; merging a corporate and investment bank is usually a disaster so that the collapse in revenues would offset any benefits; and BNP is already in a merger - risks associated with the process would rise dramatically,” says Tiberghien.

A merger between Credit Agricole and SocGen looks more viable, but Tiberghien points out that Credit Agricole is already at its maximum permitted market share in French retail banking and is committed to reducing its exposure to investment banking, so this doesn’t necessarily make sense either.

For the moment, therefore investment banking jobs in the three institutions therefore look safe – particularly in the key equity derivatives franchise where both SocGen and BNP are strong. However, one French equity derivatives headhunter says both banks are still massively overstaffed in the area: “They still have too many people in structured equity derivatives. Their teams are huge and they haven’t let many people go.”