Toxic assets blow hole in SocGen profit
FRENCH lender Société Générale surprised markets yesterday by reporting a sharp decline in revenues in the fourth quarter of last year, with losses from legacy assets and Greek debt write-downs coming on top of a slowdown for its investment bank.
Overall, fourth quarter pre-tax profits for the group fell 60 per cent, with the investment bank plunging deep into the red to book a pre-tax loss of €738m. Overall, that knocked the division’s full-year profits down to €669m.
SocGen blamed the decline on “historically low levels [of] client-driven activity” due to the credit crunch in late autumn.
Costs from its “legacy assets” – mostly complex financial products bought pre-2008 – also ramped up at the end of the year, losing €621m in the last quarter for a total loss of €961m in 2011, 38 per cent worse than in 2010.
The bank also booked a loss of €162m in the fourth quarter from writing down the value of its Greek bond holdings by 75 per cent. The cost of a restructuring charge – in part severance pay – came to €215m.
On a more positive note, SocGen dramatically scaled back its use of dollars funding last year, cutting down its needs from $100bn in June to $45bn at the end of last year.