Societe Generale sees loss on Newedge write-down

PUBLISHED : Wednesday, 13 February, 2013, 10:13am
UPDATED : Thursday, 14 February, 2013, 4:41am

Societe Generale, France's second-largest bank, posted a fourth-quarter loss after writing down its stake in derivatives broker Newedge Group and setting aside €300 million (HK$3.13 billion) for legal expenses.

The net loss was €476 million, compared with a €100 million profit a year earlier.

The bank had goodwill write-downs of €392 million in the quarter, mostly on Newedge.

Societe Generale cut jobs and sold assets last year to cope with stricter international capital and liquidity rules after French banks had their access blocked to US dollar funding and European debt markets. The write-downs and litigation costs in the quarter offset a rebound in earnings at the corporate- and investment-banking unit, where the firm trimmed about 1,600 jobs after shuffling management.

The bank "succeeded, in a turbulent economic environment, in maintaining a good level of activity", chief executive officer Frederic Oudea said.

Societe Generale took a €300 million fourth-quarter charge on "litigation issues", it said, without giving further details. It also took a €686 million charge related to its own debt in the quarter. Banks book accounting charges or gains tied to the theoretical cost of buying back their own debt as market prices fluctuate.

The lender, which trails larger French rival BNP Paribas in building up its capital buffer, confirmed yesterday that it aimed to reach a core Tier 1 ratio under Basel III of 9 to 9.5 per cent by the end of the year.

Societe Generale has gained 15 per cent to €32.67 this year, giving it a market value of €25.5 billion. BNP Paribas has added 8.1 per cent.

BNP Paribas, which is scheduled to report earnings today, is expected to have a €1.01 billion fourth-quarter profit, up from €765 million a year earlier. Deutsche Bank, Europe's biggest bank by assets, posted a €2.17 billion quarterly loss as it eliminated more than 1,400 staff and set aside €1 billion for legal costs.

Global central bank chiefs last month gave lenders four more years to fully comply with international liquidity rules. Banks in the European Union may need to comply with the rules before competitors in other parts of the world.