2nd UPDATE: SocGen Shares Surge After 2Q Net Profit Beats Views
August 05 2009 - 9:36AM
Dow Jones News
French bank Societe Generale SA (GLE.FR) Wednesday reported
stronger-than-expected second-quarter net profit, 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 crisis, helping to
send the shares sharply higher.
Net profit for the quarter ended June 30 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, France's second-largest bank by market value, 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 stayed on a similar trend in July, Chief
Executive Frederic Oudea said Wednesday, but he cautioned that
risks of further market volatility remained.
"The key areas where Societe Generale is strong (such as equity
derivatives) are making money," JPMorgan analysts said in a note to
investors. The analysts kept their overweight rating on the
stock.
At 1252 GMT, SocGen shares were up EUR2.79, or 6%, to EUR49.10,
outperforming a 1.8% rise in the Stoxx 600 European bank index.
Prior to Wednesday, the stock had gained 29% from the start of the
year, underperforming the Stoxx 600 bank index, as concerns still
linger about some of the bank's riskier assets.
The group's 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. Chief Financial Officer
Didier Valet urged against "drawing too many conclusions" from the
sequential decline.
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.
Company Web site: www.socgen.com
-By Jethro Mullen, Dow Jones Newswires; 33 1 4017 1738;
jethro.mullen@dowjones.com