SocGen posts unexpected loss after writedowns
Societe Generale slumped to a surprise loss in the first quarter as higher-than-expected writedowns and provisions hit the bank’s earnings.
SocGen, which fell victim to a rogue trading scandal last year, fell to a net loss of 278 million euros ($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 euros.
Non-recurring items had a negative impact of 1.9 billion euros 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 capitalization, 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.
On Wednesday, 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 free credit report.
UNDER PRESSURE
Bouton came under pressure after a rogue trading scandal in January 2008, when SocGen unveiled 4.9 billion euros of losses from unauthorized trades conducted by Jerome Kerviel, a former junior trader at the bank.
French President Nicolas Sarkozy criticized Bouton over the Kerviel affair and 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.
The bank’s first-quarter writedowns included hits on asset-backed securities, collateralized debt obligations (CDOs) on U.S. residential mortgage backed securities and monoline insurers.
SocGen added it could not rule out further writedowns in the future and said the economic outlook remained uncertain.
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