Société Générale slumped to a surprise loss in the first quarter as higher-than-expected writedowns and provisions hit the bank's earnings.
Société Générale, which fell victim to a rogue trading scandal last year, fell to a net loss of €278 million ($370 million) from a year-ago profit of €1.1 billion.
Analysts polled by Reuters had on average expected a first-quarter net profit of €320 million. Non-recurring items had a negative impact of €1.9 billion on its earnings, SocGen said in a statement.
This reflected the impact of writedowns at its investment banking unit, on monoline insurers - which take on credit risk by providing guarantees on bonds and which have been hard hit by the credit crunch - and on credit default swaps (CDS).
SocGen's loss was in stark contrast to BNP Paribas, France's biggest bank by market capitalisation, which this week reported better-than-expected first-quarter profits.
“The level of writedowns at SocGen is surprising, and their French retail bank is less resilient than at BNP,” said West LB analyst Christoph Bossmann, who has a “neutral” rating on SocGen shares.
Yesterday, SocGen said its chief executive Frederic Oudea would also become chairman after Daniel Bouton, the previous chairman, resigned following a wave of negative publicity over the bank.
Mr Bouton came under pressure after a rogue trading scandal in January 2008, when SocGen unveiled €4.9 billion of losses from unauthorised trades conducted by Jerome Kerviel, a former junior trader at the bank.
French President Nicolas Sarkozy criticised Bouton over the Kerviel affair and Mr Sarkozy's administration again attacked the bank last month over executive pay packages.
SocGen's top managers were forced to give up stock options in March following public anger over the fact that money received from the French state to help it through the financial crisis could be used to remunerate executives.
SocGen said it would use a second tranche of French state aid through a preference share issue.
Reuters