Societe Generale Sees Significant Profit Reduction In Fourth Quarter (PINK: SCGLY)
Societe Generale announced that its profit plunged in the last three months of 2011. The bank said its net income dropped 89%, to 100 million euros ($130 million), from the same period the previous year. Analysts expected profits of more than 300 million euros. Revenue dropped 12.4% to 6 billion euros.
The company has been dealing with fallout from the sovereign debt crisis and economic turmoil around the world. Societe Generale announced that it took an additional charge of 162 million euros on the value of its Greek government debt and has now written down the holdings by 75%. The company still had 2.7 billion euros of exposure to Greece, Ireland, Italy and Spain at the end of last month.
Societe Generale has been struggling in its core businesses lately. The international retail banking group saw its earnings drop by nearly 28% to 75 million euros. The corporate and investment banking unit reported a fourth-quarter loss of 482 million euros, compared with a profit of 311 million euros for the same period last year. The French retail business was the lone bright spot, increasing its profit by nearly 16%. The bank is based in Paris
Frederic Oudéa, Societe Generale’s chief executive, said in an interview that the bank was joining the parade of firms sharply reducing bonuses and was cutting the bonus pool “by something like 44 percent.” The bank is also focused on bolstering its balance sheet. Mr. Oudéa said, “The group accelerated its transformation in order to adapt to the new capital and liquidity constraints, while at the same time maintaining its businesses’ profit-generating capacity, with a very strict risk and cost management policy.”
European Central Bank‘s longer-term refinancing operations helped reduce funding concerns that made the end of 2011 a tense situation. The program, announced in December, gives banks virtually unlimited three-year loans at the benchmark interest rate of 1%. Mr. Oudéa remarked, “I’m happy with the start of the year regarding capital markets,” but he said he remained “overall prudent for 2012.”