Greek bailout hits SocGen as profits miss expectations

City A.M. Reporter
FRENCH bank Societe Generale showed the scars of its share of a Greek bailout in its second quarter results, helping to push its 2012 profit goal out of reach.

France’s second-biggest bank warned its aim of €6bn (£5.2bn) in net profit in 2012, reiterated as recently as May this year, would now be “difficult to achieve” because of a tougher economic and financial backdrop.

SocGen, whose investment bank struggled in some areas, took a €395m pre-tax hit on its exposure to Greece because of its contribution to a bailout plan.

The bank’s second-quarter net income fell 31 per cent from a year ago to €747m, well below the €1.15bn average forecast from analysts.

“The results are below consensus, even without the Greek provision,” said Alex Koagne, financial analyst at Natixis.

Chief executive Frederic Oudea pointed to its corporate and investment (CIB) banking performance as one of the main drags on profit goals as economic fears unnerved investors.

“The generation of revenues in CIB will be weaker than expected,” he said.

“I don’t want to put my traders under pressure ... to take stupid credit risks to reach a number,” he added.

SocGen said its core Tier 1 ratio improved to 9.3 per cent at the end of June.

“This appears robust, but on a like-for-like basis with peer banks, then SocGen has a Basel III ratio more like 7.2 per cent by our analysis,” said Joseph Dickerson, an analyst at Espirito Santo.