UPDATE: SocGen Posts 2Q Profit After 1Q Loss Despite Charges
August 05 2009 - 2:23AM
Dow Jones News
French bank Societe Generale SA (GLE.FR) Wednesday reported a
return to profit in the second quarter after a first-quarter loss,
despite being hit by EUR1.7 billion in charges and write-downs, and
said it remains able to soak up the effects of the financial and
economic crisis.
Net profit for the quarter ended June 30 still decreased 52% to
EUR309 million from EUR644 million a year earlier, but came in
above an average EUR114 million forecast from eight analysts polled
by Dow Jones Newswires. The profit contrasts with the EUR278
million loss the group posted in the first quarter of 2009.
SocGen had already warned in July that losses on credit default
swaps and the reversal of gains on its own debt amounting to EUR1.3
billion meant it would turn only a slight profit for the second
quarter. SocGen's statement Wednesday added to that total a further
EUR397 million in write-downs and losses on risky assets, mainly
related to exotic credit derivatives.
Despite those elements, revenue rose 2.4% year-on-year to
EUR5.72 billion, above the average EUR5.53 billion forecast by
analysts.
Growth was particularly strong in the group's operating
performance for its corporate and investment bank unit, where
revenue almost doubled year-on-year to EUR1.29 billion.
The unit's activity remained "very good" in July, Chief
Executive Frederic Oudea said Wednesday on French radio station
BFM.
The bumper investment bank performance follows on the heels of
impressive showings this week from European peers such as Barclays
PLC (BCS) and SocGen's cross-town rival BNP Paribas SA (BNP.FR),
which Tuesday reported a 6.6% rise in net profit to EUR1.6
billion.
SocGen's provisions for credit risk more than tripled to EUR1.08
billion year-on-year, reflecting the pressure the economic downturn
is exerting on borrowers' finances. But provisions dipped somewhat
compared with the first quarter due to "the absence of a
deterioration" in the credit portfolio.
SocGen said that its "portfolio of activities and its high
solvency level mean that the group is able to absorb the effects of
the crisis" and capitalize on the withdrawal of some competitors,
allowing it to take market share.
The group's Tier 1 ratio increased to 9.5% at the end of June
from 9.2% at the end of March. The end-of-March figure takes into
account the EUR1.7 billion in non-voting shares that SocGen
subsequently issued to the French government as part of the support
plan for lending in the country's economy.
SocGen shares closed Tuesday up EUR0.21, or 0.5%, to EUR46.31,
slightly outperforming the Stoxx 600 European bank index. The stock
has gained 29% since the start of the year, underperforming the
Stoxx 600 bank index, as concerns linger about some of the bank's
riskier assets.
Company Web site: www.socgen.com
-By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738;
jethro.mullen@dowjones.com