Jacques Brinon/Associated PressSéverin Cabannes, left, and Frédéric Oudéa of Société Générale. The bank said it was hurt by slowing growth in Europe.
PARIS — Société Générale, the big French bank, reported second-quarter results on Wednesday that fell short of analysts’ estimates as it struggled against a downturn in Europe.
Net profit in the second quarter fell 42 percent, to 433 million euros ($530 million), compared with 747 million euros in the period a year earlier. Analysts were expecting the bank to earn 764 million euros in the latest quarter. The bank also said it was making progress in bolstering its capital cushion.
“Despite a challenging environment, the Société Générale Group has progressed, quarter after quarter, with its transformation strategy, in line with its objectives,” Frédéric Oudéa, the bank’s chief executive, said in a statement.
Société Générale took a series of write-downs related to past acquisitions, including 250 million euros on Rosbank in Russia and 200 million euros on TCW Group, a fund firm in Los Angeles. Analysts are waiting to see whether Société Générale sells TCW as part of a broader plan to raise money.
Like the results of its peers, the report raised concerns that financial weakness could persist as the debt crisis drags on.
The bank said growth in Europe slowed significantly in the second quarter, crimping some of its profitability from retail operations. Its international retail banking revenue fell nearly 2 percent, to 1.24 billion euros.
The bank signaled that it also continued to face financial challenges with its Greek subsidiary, Geniki Bank. In a statement, Société Générale said its operations in Central and Eastern Europe “excluding Greece” did well, but it did not provide figures for the Greek unit. Société Générale has recently cut financing to Geniki to a minimum as the Greek economy shrinks.
French banks have been reducing their exposure to Greece by selling much of the nation’s sovereign debt, and those with subsidiaries there are scrambling to figure out how to cope with the worsening situation. One of Société Générale’s French rivals, Crédit Agricole, said recently that it was in talks to sell its Greek subsidiary, Emporiki Bank, as soon as possible.
The debt crisis is also wreaking havoc on the investment banking business. The bank said customers remain reticent as policy makers struggle to find “durable solutions to the sovereign debt crisis.” Corporate and investment banking revenue fell more than 30 percent, to 1.22 billion euros.
Société Générale also noted deteriorating conditions in France, which has the largest economy in the euro zone after Germany’s. So far, France has avoided the worst of the debt crisis that first engulfed Greece and now Spain. But the economy has been softening, and the government’s share of the bill for cleaning up the crisis is likely to grow.
The bank’s French retail operations remained flat at 2.04 billion euros.
Shares of Société Générale rose 0.5 percent in Paris, to 18.11 euros.
Article source: http://dealbook.nytimes.com/2012/08/01/societe-generale-profit-falls-42-on-weak-economy/?partner=rss&emc=rss
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