Are you sure?

SocGen eyes better 2010 results, writedowns to fall

Societe Generale expects results to recover in 2010 with lower bad risk write-downs after it rattled markets last month with a toxic asset warning.

France's second-biggest listed bank has had to trim back much of its previously-booming investment banking activities after taking bigger hits than many of its rivals from the global credit crisis.

The company on Thursday reported fourth-quarter net profit of €221 million, up from 87 million a year earlier and ahead of a consensus forecast of €150 million, but below its third-quarter net profit of €426 million.

It cut its dividend to €0.29 from €1.2. Shareholders can opt for a scrip dividend.

In January, SocGen said it was only expecting a “slight profit” for the fourth quarter after taking a new 1.4 billion euro hit on risky assets.

The group, which suffered a €4.9 billion rogue trading scandal in 2008, has been weighed down by its exposure to toxic assets such as collateral debt obligations (CDOs) although it expected fewer writedowns this year compared with 2009.

“2010 is likely to be marked by a sharp rebound in the group's financial results due notably to the gradual elimination of the impact of the financial crisis,” SocGen said in a statement. It also expects better results at its domestic and overseas retail banking divisions.

SocGen's fourth-quarter net profit was a fraction of the €1.37 billion reported for the same quarter by BNP Paribas, France's biggest listed bank, on Wednesday.

It also paled in comparison to Deutsche Bank's fourth-quarter net profit of €1.3 billion and profits of $3.3 billion and nearly $5 billion at Wall Street banks JP Morgan and Goldman Sachs respectively.

One Paris-based trader described SocGen's numbers as a “bad quality set of figures”.

Another trader said that while he was “pleasantly surprised” by SocGen's earnings, there could be some profit taking on the stock, which closed up 2.4% on Wednesday.

The French group added it had agreed with its Russian partner Interros to combine Rosbank and SocGen's other Russian units into a new single entity which would be 81.5% owned by SocGen.

The new unit would employ 30,000 people and become Russia's fifth-biggest bank by the size of credit portfolio.

“We want to create a bank of reference in Russia,” Chief Executive Frederic Oudea told French radio BFM.

The investment banking division has been weighed down by writedowns and posted another loss during the fourth quarter.

Like many banks around the world, France's lenders have come under political pressure to make moderate bonus payments. France has also joined Britain in imposing a tax on trader bonuses.

Oudea said SocGen had set aside €250 million for its 2009 traders bonuses -- less than the €500 million set aside by  BNP Paribas.

SocGen is also in the midst of a potentially damaging legal battle with one of its top former fund managers, Jeffrey Gundlach.

Gundlach, who was at SocGen's American fund management arm TCW, had a lawsuit filed against him from TCW after leaving the firm but has since sought to countersue TCW.  (Reuters)