DealBook: Profit Drops 31% at Société Générale

Jean-Claude Coutausse/Bloomberg NewsThe headquarters of Société Générale, the French banking group, in La Defense, outside Paris.

Société Générale, the second-largest French bank after BNP Paribas, on Wednesday reported that income fell 31 percent in the second quarter compared with the period a year earlier, driven by a write-down on Greek sovereign debt.

The bank reported second-quarter net income of 747 million euros ($1.06 billion), missing analysts’ expectations. It also said its goal of 6 billion euros in profit next year would be “difficult to achieve.”

The warning, while significant, was “already embedded in the consensus,” according to Pascal Decque, an analyst at Cheuvreux who expects something closer to 5.5 billion euros.

“Growing concerns over European sovereign debt resulted in risk aversion and erratic market movements, in line with political developments,” the bank said.

Benoit Tessier/ReutersFrederic Oudea, chief of Société Générale.

The bank’s shares fell 1.81 euros, or 5.57 percent, to 30.69 euros in midmorning trading in Paris.

European leaders approved a plan last month to provide Greece with a rescue package worth 109 billion euros. That plan asked bondholders to accept a restructuring on the troubled nation’s debt.

BNP Paribas said on Tuesday that it would book a 534 million euro charge on Greek sovereign debt, while another French bank, Crédit Agricole, said the rescue would cost it about 150 million euros.

“These results incorporate the write-downs booked on Greek government bonds, whose impact is nevertheless limited,” Frederic Oudea, head of Société Générale, said in the bank’s earnings statement. It puts the amount of the hit at 395 million euros.

Société Générale follows other major European lenders, including BNP Paribas and Deutsche Bank, that have taken write-downs as part of an agreement they came to with European officials.

“The group net income target of 6 billion euros in 2012 now appears difficult to achieve within the scheduled timeframe,” the bank said in a statement. The warning comes after UBS abandoned its earnings target last month and amid large job cuts at HSBC, Credit Suisse and Barclays.

Société Générale also reported that net profit at its international retail banking business, which includes its Greek arm Geniki, fell to 116 million euros in the quarter from 125 million euros in the period a year earlier.

Société Générale said that revenue at its investment banking unit increased by 7.4 percent, to 1.8 billion euros, based on growth in its advisory business, where it has been adding employees. Still, analysts were disappointed by the performance, which included declines on its fixed-income and equities desks.

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