SocGen profit up as capital growth stalls

SOCIETE Generale (SocGen) moved back into profit last year, bringing its returns on equity up to 9.8 per cent after they ended 2009 in barely positive territory at 0.9 per cent.

Group pre-tax profit rose more than sevenfold, from €800m (£674.5m) to €5.8bn in 2010, with every business line in the bank improving its performance except for its private banking division, where pre-tax profits plunged 45 per cent.

The bank blamed an uncertain economic environment for keeping private banking client activity low, despite an inflow of assets under management.

Its investment and corporate bank, however, showed a dramatic recovery: pre-tax profits were up more than 300 per cent to €2.37bn, accounting for almost half of the group’s total earnings.

The bank said the division benefitted from an expanded product range, including the launch of a new forex trading platform. It also more than doubled its European market share in advisory business from 4.5 per cent to 9.2 per cent.

However, the bank’s core tier one capital ratio showed barely any improvement, inching up from 8.4 per cent to 8.5 per cent under Basel II. With Basel III’s more stringent definitions and a 7.5 per cent minimum, the bank still has some way to go to bring it in line with coming regulations.

Chief executive Frédéric Oudéa said SocGen is one year into a five-year plan to adjust to the new environment, setting a target of €6bn in net income for next year (versus €3.9bn in 2010).

“Far-reaching changes in prudential rules will lead to radical changes in the way banking markets operate, especially in Europe,” said the bank in its results statement.