SocGen warns on 2012 targets

Société Génerale warned it would struggle to reach its 2012 profit target as its exposure to Greece and a tougher economic backdrop took its toll on second-quarter earnings.

France's second-biggest bank said its aim of €6 billion in net profit in 2012, reiterated in May this year, would now be "difficult to achieve".

The ambition had long been doubted by analysts, who were predicting profit of €5.3 billion for that year, according to a Thomson Reuters poll.

Chief executive Frederic Oudea pointed to an "uncertain economic and financial environment" in a statement, adding that the group had put in a resilient performance in the second quarter despite this backdrop.

Société Génerale's quarterly net income was below expectations, coming in at €747 million compared with the €1.15 billion average estimate from analysts. It was down 31.1 per cent from a year earlier.

The bank took a €395 million pretax hit on its exposure to Greece because of its contribution to a bailout plan, while loan loss provisions increased. These rose by 17.3 per cent from a year ago to €1.185 billion and were 35 per cent higher than in the first quarter.

Société Génerale has about €2.65 billion in Greek sovereign bonds, on which it will take a 21 per cent loss.

Revenue also stumbled, falling 2.6 per cent compared with the second quarter of 2010, dragged down by a drop at its private banking division.

At €6.5 billion, overall revenue was below Thomson Reuters projections of €6.62 billion, according to the average of 12 analyst estimates.

Société Génerale did have a more resilient performance in some businesses, however, including in investment banking where revenue was nearly up by 5 per cent, while retail banking revenue also rose.

The bank, which has been under constant scrutiny over its capital levels relative to peers, said its core Tier 1 ratio would reach 9 per cent at the end of 2013 when tougher rules kick in, Oudea said.

This would put it above minimal Basel III regulatory requirements. Its core Tier 1 ratio stood at 9.3 per cent in the second quarter.

Reuters