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November 8, 2012 9:41 am
Société Générale reported an 86 per cent fall in quarterly net profit on Thursday as the cost of exiting businesses outweighed a quadrupling of investment banking profits.
France’s second-largest bank by market value booked €771m ($982m) of exceptional items, including a hit of €389m on the theoretical cost of buying back its own debt, €130m loss on the sale of its Greek bank and €92m on the sale of TCW, the US-based asset management company.
SocGen reported net profits of €85m in the three months to the end of September, down from €622m in the same period last year. Analysts at Citigroup said the bank’s operating profit – excluding exceptionals – of €1.4bn was better than expected thanks to stronger trading across most divisions.
Revenues fell 17 per cent to €5.4bn in the quarter, reflecting the smaller balance sheet.
Like other French banks, SocGen has been reducing the size of its balance sheet to boost capital to comply with new European regulations. Frédéric Oudéa, chairman and chief executive, said the investment bank’s loan disposal programme was completed, having achieved €16bn of asset sales since June 2011.
The bank was on track to meet its target of a core tier one ratio – a key measure of balance sheet strength – of between 9-9.5 per cent by the end of next year, he said.
SocGen was reporting a day after BNP Paribas, France’s largest bank by assets, announced quarterly net profits that had more than doubled to €1.3bn, partly because of fewer exceptional charges and a stronger capital base.
Investment banking net profit jumped to €322m from €77m in the same quarter last year, boosted by stronger financial markets which drove higher capital markets revenue.
The French economy had “slowed to a crawl”, SocGen said, reporting a 10 per cent fall in net profit in its French retail network to €351m.
Mr Oudéa said he expected difficult economic conditions to continue next year.
“Economic growth should remain sluggish overall, with a key uncertainty in the US – the fiscal cliff – in the beginning of the year,” Mr Oudéa said, referring to the threat of expiring tax cuts and government expenditure. “In the eurozone, we can’t expect miracles.”
But he said the bank’s deleveraging and clean-out put it in a strong position to deal with the “complex and demanding challenges in 2013”.
He said talks were ongoing exploring the possibility of selling its Egyptian unit to Qatar National Bank.
Mr Oudéa also said SocGen had yet to receive any charge or allegation in the Libor rate-fixing scandal and had nothing new to say about the bank’s internal inquiry into the matter.
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