FRENCH BANK Societe Generale’s quarterly profit tumbled 42 per cent, hit by losses at its investment bank, which it is shrinking in response to the euro zone crisis, and one-off write-downs on the value of US and Russian units.
Under pressure to strengthen its balance sheet, France’s second largest listed bank is more than half way through a plan to slash debt and sell assets at its corporate and investment bank.
Profit at that unit, which has cut back risk since a huge rogue-trading loss in early 2008 hammered its reputation, plunged by 70 per cent in the second quarter.
The global economic slowdown, the cost of selling loan portfolios and losses from toxic assets left over from the global financial crisis all weighed, SocGen said yesterday.
Rivals are also suffering. Deutsche Bank this week said it would cut 1,500 investment banking jobs after a profit slump, while Switzerland’s UBS swung to a loss at its investment bank in the second quarter.
Investors will be watching to see whether SocGen’s domestic arch-rival BNP Paribas held up better when it reports results today.
The bank is seen clearing a key regulatory capital hurdle, stealing a march on SocGen in the early stages of an industry-wide race.
It took goodwill write-downs totalling €476 million on US fund unit TCW, which sources say it is close to selling, and Russian subsidiary Rosbank, which is being overhauled.
SocGen said second-quarter net income fell to €433 million while revenue fell 3.6 per cent to €6.27 billion.
In addition to the goodwill writedowns, SocGen took a hit on the cost of selling assets to cut debt. The bank said it was confident of meeting its end-2013 target for a core Tier 1 ratio of between 9 and 9.5 per cent, to comply with Basel III rules.
The metric, which shows a bank’s ability to withstand losses, is closely watched by investors.Cabannes said SocGen was co-operating with authorities investigating the Libor rate-fixing scandal that has rocked the industry and cost the jobs of top British bank Barclays’ executives.
No allegations of wrongdoing have been made against SocGen after the bank answered regulators’ questions. - (Reuters)
