French bank Societe Generale is likely to make more writedowns this year as part of a “pruning” process that will help it emerge stronger, its chief executive told the Financial Times.
France's second-largest bank issued a profit warning on January 13 as it took a further €1.4 billion ($2 billion) hit from risky assets.
“There is still probably some (more) provisioning. We think it will be manageable compared to the bank's revenue generation and that the bulk has been taken,” he was quoted as saying in the paper on Thursday.
SocGen is “pruning in order to make the tree grow stronger”, so that by mid-2011, once regulatory and capital issues affecting the industry have been worked out, the company will see the benefits, Oudea said.
SocGen said earlier this month that the impact from risky assets comprised writedowns on collateralized debt obligations
(CDOs) linked to residential mortgage-backed securities, as well as changes in the mark-to-market valuation of credit default swaps (CDS).
The bank plans to put around €37 billion of toxic assets into a single legal entity, which could help it reduce future losses from this area.
Last month the European Central Bank raised its estimate of writedowns from banks in the eurozone, while analysts expect that America's top banks may suffer a fall in profits due to lower debt trading volumes. (Reuters)