SocGen cuts Russian exposure as Q4 profit jumps

French bank Societe Generale said on Thursday it would cut its exposure to Russia in the face of mounting loan loss provisions as it posted a nearly three-fold increase in fourth-quarter net profit.

France’s second-largest bank said it would keep reducing funding for its Russian units, leaving them increasingly dependent on rouble bond issues for financing.

The group also said it had raised its litigation risk provisions in the second half of the year by a further €200 million to €1.1 billion euros amid an internal audit for possible US sanctions breaches.

SocGen posted fourth-quarter net income of €511 million, up from €191 million a year earlier, while revenues rose 7.5 per cent to €6.123 billion.

For the full year 2014, the group reported a 31.7 per cent increase in net income to €2.692 billion as loan loss provisions fell sharply and revenues rose 5 percent to €23.561 billion.

The result improved even though the bank booked a €525 million writedown on the value of its Russian unit Rosbank and took a €200 million hit to exit consumer finance operations in Brazil.

The bank said it expected loan loss provisions in Russia to double as the country’s commodities-focused economy struggles with a sharp fall in oil prices and western sanctions imposed after Moscow annexed Crimea from Ukraine last March.

SocGen said it cut senior intragroup loans to its Russian activities last year by €600 million and expected to keep reducing this year.

While Russia weighed on its international retail banking business, SocGen saw revenues from its French retail network rise nearly 2 per cent despite a sluggish economy.

Investment banking income rose 4.1 per cent last year, boosted in large part by a 12.4 per cent increase in financing and advisory activities with natural resources financing seeing a strong year despite a fall in commodities prices.

That helped offset a 5.5 per cent drop in revenues from equity activities and a 4.6 per cent fall in fixed income, currencies and commodities revenues.

The bank proposed a 2014 dividend of €1.2 per share, up from €1 the previous year, leaving its pay out ratio unchanged at 40 per cent. However, it said it aimed to lift the ratio to 50 per cent this year.

Reuters