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Societe Generale Posts Fourth-Quarter Loss on Writedown


Societe Generale SA, 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 euros ($403 million) for legal expenses.

The net loss was 476 million euros, compared with a 100 million-euro profit a year earlier, the Paris-based lender said in a statement today. That missed the average estimate for a loss of 203 million euros by 10 analysts surveyed by Bloomberg. The bank had goodwill writedowns of 392 million euros 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 U.S. dollar funding and European debt markets. The writedowns 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 in 2012 after shuffling management at the business.

The bank “succeeded, in a turbulent economic environment, in maintaining a good level of activity,” Chief Executive Officer Frederic Oudea, 49, said in the statement.

Societe Generale took a 300 million-euro fourth-quarter charge on “litigation issues,” it said, without giving further details. The lender also took a 686 million-euro 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.

Basel Goal

The lender, which trails larger French rival BNP Paribas SA in building up its capital buffer, confirmed today that it aims to reach a core Tier 1 ratio under Basel III of 9 percent to 9.5 percent by the end of 2013.

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

Societe Generale’s customer deposits last year rose by 16 billion euros “within stable sources of funds,” the bank said. The company said last month that complying with a 100 percent Basel III 30-day liquidity ratio is “within its reach.” BNP Paribas has said that deposits from large companies are “at the heart” of its global corporate banking business.

Liquidity

BNP Paribas, which is scheduled to report earnings tomorrow, will probably have a 1.01 billion-euro fourth-quarter profit, up from 765 million euros a year earlier, according to the average estimate of eight analysts surveyed by Bloomberg. Deutsche Bank AG, Europe’s biggest bank by assets, last month posted a 2.17 billion-euro quarterly loss as it eliminated more than 1,400 staff and set aside 1 billion euros 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, according to a document obtained by Bloomberg.

The liquidity coverage ratio — which would force banks to hold enough easy-to-sell assets to survive a 30-day credit squeeze — is part of an overhaul of global financial rules, known as Basel III, intended to prevent a repeat of the financial crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc.

Societe Generale, which omitted a dividend for 2011 as it accumulated capital, will pay a dividend of 45 euro cents a share for 2012, corresponding to a 26 percent payout on profit excluding the effects of own-debt revaluations, it said. The firm’s full-year net income fell 68 percent to 774 million euros.

CIB Turnaround

Societe Generale’s corporate and investment bank completed its 16 billion-euro loan-disposal program started in June 2011 and over the last 18 months it also sold 19 billion euros of assets left over from the U.S. subprime crisis, it said.

Securities firms have posted gains in revenue since European Central Bank President Mario Draghi’s July pledge to do “whatever it takes” to defend the euro sparked a rally in bond markets.

Societe Generale’s corporate- and investment-banking unit had a 249 million-euro profit in the quarter compared with a loss of 482 million euros a year earlier, beating analysts estimates for earnings of 219 million euros. Global-markets revenue climbed 33 percent to 1.03 billion euros.

Full-year revenue from global-market activities, which includes trading on equity and fixed-income securities, was 4.88 billion euros in 2012, up 18 percent from a year earlier, the bank said.

Bad Loans

Net income from Societe Generale’s French consumer-banking network fell 16 percent to 254 million euros, missing analysts’ estimates for 294 million euros. The unit’s provisions for bad loans in the fourth quarter rose 27 percent to 300 million euros, it said.

At its international consumer-banking business, profit fell 69 percent to 23 million euros in the quarter. In Romania, “the marked deterioration in the economic situation” led to a “sharp increase” in bad-loan provisions last year.

Unlike BNP Paribas and Credit Agricole SA, Societe Generale doesn’t operate an Italian branch network. French banks held $494 billion in private and public debt in Greece, Ireland, Italy, Portugal and Spain at the end of September, Bank for International Settlements data show.

(Source: Bloomberg)