DealBook: Societe Generale Profit Plunged in Third Quarter

Jacky Naegelen/ReutersThe headquarters of Société Générale in Paris.

9:53 a.m. | Updated

PARIS – Société Générale, the big French bank, said on Thursday that its third-quarter profit plunged as it booked large one-time charges.

The bank reported that net income fell 86 percent, to 85 million euros ($108 million), from 622 million euros in the period a year earlier – well below the 139 million euros analysts surveyed by Reuters had been expecting. The bank said net revenue declined 17 percent, to 5.4 billion euros.

Société Générale, based in Paris, said its bottom line was hurt by one-time charges that included a cost of 389 million euros for revaluing its own debt. It also wrote down good will and had losses on the sale of assets in Greece and the United States. Excluding those items, the bank said underlying net income was 856 million euros.

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Frédéric Oudéa, the chairman and chief executive, said in a statement that the bank’s businesses “have once again demonstrated their resilience and capital-generating capacity. The quality of our portfolios and the attention we pay to managing our risks have enabled us to limit the cost of risk in a strained economic environment.”

Société Générale said its corporate and investment banking unit had completed a loan-disposal plan begun in June 2011, having sold or amortized 16 billion euros worth of assets and cutting the units legacy assets by about two-thirds. Its legacy assets below investment grade were reduced to 3.2 billion euros by mid-October.

The bank came under market pressure last year because of its exposure to so-called peripheral euro zone nations and has been scaling back in that region.

It said in September it would sell its 99 percent holding in its Greek subsidiary, Geniki Bank, to Piraeus Bank. It also announced plans to sell TCW, an American asset-management business, to Carlyle Group and TCW’s management. A California judge has issued a tentative order that could block or delay the TCW deal as he considers whether to allow a lawsuit by EIG Global Energy Partners to proceed.

Société Générale said its core Tier 1 ratio, a measure of a firm’s ability to weather financial shocks, rose to 10.3 percent at the end of September, based on so-called Basel 2.5 capital adequacy rules – a slight improvement from the second quarter. It said it expected to achieve a Basel III core Tier 1 capital ratio “of between 9 percent and 9.5 percent” by the end of next year.

French banks, though, continue to face significant worries.

The ratings agency Standard Poor’s changed its outlook in October on Société Générale to negative from stable, citing a growing level of economic risk to the country’s banking system, both from the slumping euro zone economy and the likelihood of a downturn in the French housing sector. S.P. also cut its credit rating on the largest French bank, BNP Paribas, by one notch to A+/A-1, the same level as Société Générale.

This post has been revised to reflect the following correction:

Correction: November 8, 2012

Article source: http://dealbook.nytimes.com/2012/11/08/societe-generale-profit-plunges-in-third-quarter/?partner=rss&emc=rss