European Banks Braced for Tough 2009

Three European banks said on Wednesday they were preparing for a tough year after taking body blows in the last quarter of 2008 from the credit crisis that forced them to seek government help.

France's Societe Generale eked out a small profit for the fourth quarter, compared with a big year-ago loss when it was hit by a rogue trading scandal, while ING of the Netherlands and Germany's Commerzbank reported losses on Wednesday.

Societe Generale shares were up 2.6 percent, Commerzbank was up 6.7 percent and ING was down 3.86 percent by the closing bell on Wednesday compared with a .98 percent rise in the DJ Stoxx banking index.

SocGen stock, which tumbled nearly 10 percent on Tuesday, is still down 34 percent in 2009, while the banking index has lost 21 percent.

The three banks are among many lenders in Europe that have sought billions of euros of state help to rebuild balance sheets battered by the crisis.

Societe Generale put its expansion plans for Russia on ice and re-organized its corporate and investment banking activities while ING said on Wednesday it would aim to preserve capital in 2009 and focus on fewer markets.

Commerzbank slid deeper into the red late last year as its business of lending for commercial property projects and trading racked up heavy losses in its 'most difficult year ever'.

With the promise of another very difficult year ahead, Germany's second-largest lender unveiled a bumper 2008 loss in its corporates and markets business of 1.7 billion euros ($2.2 billion) and a hike in the money it set aside for defaults on real estate loans.

Societe Generale expects the market to remain challenging throughout 2009 as the French bank posted fourth-quarter profit that missed market expectations.

Net profit of 87 million euros ($110 million) was below analysts' average forecast of 122 million euros, but rebounded from a loss of 3.35 billion euros a year earlier when the bank was hit by a 4.9 billion euro trading loss blamed on rogue deals by Jerome Kerviel, a former SocGen junior trader.

Russia Write-Down

SocGen said it booked a 300 million euro goodwill impairment on its Russian operations, adding it would postpone its business plan for Russia.

SocGen owns Russia's Rosbank.

ING posted a fourth-quarter loss of 3.7 billion euros ($4.7 billion) due to writedowns and said it would focus on fewer businesses and markets.

Sharon Lorimer

"Our basic strategy, based on retail savings and investments, is a solid foundation for the future, but we must reduce the complexity of the Group by focusing on fewer businesses and markets", ING Chairman and designated Chief Executive Jan Hommen said in a statement.

Earlier this month, Swiss banks UBS and Credit Suisse posted fourth-quarter losses of 8 billion and 6 billion Swiss francs, respectively, while Britain's Lloyds Banking Group unveiled an 8.5 billion pound loss at its HBOS unit.

Societe Generale's decision to put its expansion plans in Russia on hold is in line with recent warnings about a slowdown in once-booming emerging markets.

Two leading ratings agencies said on Tuesday the ratings of emerging European banks and their west European bank owners could suffer as recession bites, and the warnings caused a sell-off in European stocks and currencies.

The ratings agencies reminded investors of the crucial role a handful of Western banks has in keeping the former Communist bloc afloat after bankrolling its rampant growth in the boom years of 2005 to 2007.

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