Jacques Brinon/Associated PressThe bank Société Générale said it would increase its reserves.
PARIS — Société Générale said on Tuesday that its third-quarter net profit fell by nearly a third, weighed down by the cost of writing down its exposure to Greece.
The French bank said profit in the three months ended Sept. 30 fell 31 percent, to 622 million euros ($856 million), from the period a year earlier. Revenue rose 4 percent, to 6.5 billion euros, bolstered by a gain booked on a decline in the value of the bank’s own debt; excluding that one-time gain, revenue fell 10.6 percent.
The bank, based in Paris, said it was marking down 333 million euros of its Greek sovereign debt holdings on a pretax basis, equivalent to a 60 percent write-down, bringing its treatment of the holdings closer into line with its global peers.
Société Générale also said it had reduced its sovereign risk exposure to Greece, Italy, Ireland, Portugal and Spain to 3.4 billion euros by the end of October.
Financial institutions across Europe are recognizing losses on their holdings of Greek bonds as it becomes obvious that the country will never pay off its debts in full. On Tuesday, Munich Re, a German insurance group, said it had written down the value of its Greek bonds by 933 million euros this year.
Munich Re’s loss on Greek debt coincided with insurance losses related to the March earthquake and tsunami in Japan and Hurricane Irene in the United States, cutting its profit for the third quarter 62 percent, to 290 million euros.
BNP Paribas, the largest French bank, announced last week that it was marking down its Greek exposure by 60 percent and reducing its holdings of European sovereign debt, a move that cut its third-quarter profit 72 percent.
Jon Peace, an analyst with Nomura International in London, noted in a report that most of Société Générale’s reported net profit resulted from the 542 million euros the bank booked on its own debt. Considering that large one-time gain and the bank’s need to reduce leverage, he said, “we suspect the market will retain some caution.”
Société Générale’s shares rose 8.8 percent on Tuesday morning in Paris. For the year, the stock is down 53 percent.
Revenue from its core corporate and investment banking activities dropped almost 37 percent, to 1.2 billion euros, the result of “a challenging environment in the debt markets, with very weak activity in the primary market especially in Europe, and the effects of the European sovereign debt crisis on secondary markets.”
Frederic Oudéa, Société Générale’s chief executive, said in the statement that the third-quarter results “demonstrated the group’s resilience: the profit-generating capacity of the core businesses is robust.”
He also said there would be “a significant decline” in bonus pay this year.
Because of the regulatory requirement that banks strengthen their capital buffers, the bank said it would not pay a dividend for 2011. The third-quarter profit and the retaining of the dividend provision helped the bank to increase its core Tier 1 ratio to 9.5 percent on Sept. 30, from 8.5 percent on Dec. 31, 2010. That leaves it with the need to raise another 2.1 billion euros of capital, a sum the bank said it would cover through its own resources by the end of June 2012.
All the major French banks have said they hope to raise their capital ratios by trimming their balance sheets, rather than by raising additional equity.
Jack Ewing contributed reporting from Frankfurt.
Article source: http://feeds.nytimes.com/click.phdo?i=c22a4e0b249e3908631626f80a79b581
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