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January 14, 2010

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Writedowns leave bank barely in black

SOCIETE Generale SA said yesterday it would record about 1.4 billion euros (US$2 billion) in fresh asset writedowns in the fourth quarter of 2009, leaving the French bank barely in the black for the period.

France's second-largest listed bank blamed "the contrasted signals coming from the United States residential real estate market."

It said that despite the writedowns, it expects to report a "slight" profit in the fourth quarter when it posts its earnings next month.

Societe Generale shares fell as much as 6 percent in early trading in Paris.

The Paris-based bank had already recorded 1.9 billion euros of so-called "nonrecurring items" in the first quarter and 1.7 billion euros in the second. Those charges included writedowns on the value of credit default swaps that it uses to hedge loans, as well as provisions for loan losses.

Societe Generale had looked to be on the rebound after a difficult start to the year. Its net profit more than doubled in the third quarter after improved financial market conditions helped earnings at its investment banking unit.

The bank also warned that income from corporate and investment banking would fall in the fourth quarter compared to the third. It blamed lower investor activity in November. Despite this, the bank said it is "in a favorable position to go into 2010 with confidence."

In October, SocGen completed a 4.8 billion euro capital increase to pay back a total of 3.4 billion euros in government bailout funds.

The rest of the money will strengthen SocGen's capital position and fund the acquisition of French retail bank Credit du Nord from Franco-Belgian lender Dexia SA.


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