Societe Generale swings to $4.9 billion loss
Troubled French bank Societe Generale SA said Thursday that a trading scandal and writedowns linked to the crisis in financial markets led to a net loss in the fourth quarter.
France’s second-largest bank said it made a net loss of $4.91 billion compared with a $1.73 billion net profit in the same period of 2006.
The French bank took a $7.18 billion hit closing unauthorized positions attributed to futures trader Jerome Kerviel. Though it discovered the positions on Jan. 18, the losses that resulted were booked in the fourth quarter.
Societe Generale is seeking nearly $8 billion in new capital to shore up its finances after the trading loss and $3.8 billion in previously announced writedowns linked to the U.S. mortgage crisis.
The Paris-based bank had already announced preliminary results Feb. 11 in a prospectus for investors taking part in the capital increase, whose subscription period runs from Thursday until Feb. 29.
For the full year, SocGen confirmed that despite its recent troubles, it made a net profit of $1.39 billion, after $7.62 billion in 2006.
The trading scandal is "an isolated event that doesn’t even put the bank’s profitability into question," said Axel Pierron, an analyst with research house Celent in Paris.
"Without this event, the results of Societe Generale were not at all bad."
The bank warned of the possibility of "further write-downs" in the first quarter at its asset management division as the liquidity crisis in financial markets continues.
Banks globally have written off more than $150 billion in the past half-year, including large fourth quarter write-offs by European competitors such as UBS AG and Credit Suisse.
Societe Generale’s subprime-related writedowns are bigger than the $868.3 million announced Wednesday by cross-town rival BNP Paribas SA but are dwarfed in comparison with the $13.7 billion writedown announced by UBS.
As banks globally assess the fall-out from the subprime crisis, Societe Generale is also faced with questions about its controls systems after Kerviel was able to hide positions worth around $73.28 billion.
An internal report on Wednesday said bank officials failed to follow up on warnings and carry out more detailed checks, leaving concealment tricks allegedly used by Kerviel uncovered.
Societe Generale has tightened controls in the wake of the trading scandal, the report said.
Without the trading losses, Societe Generale said it would have gained $6.11 billion over the full year.
Full-year revenue fell 2.2% to $32.13 billion from $32.86 billion in 2006 easy payday loans. Fourth-quarter revenue dropped 32% to $5.69 billion from $8.31 billion a year-earlier.
SocGen said it is proposing a 2007 dividend of $1.32 a share compared with $7.62 the year before.