SocGen CEO ‘Happy’ With Start to 2012

Societe Generale Chief Executive Frederic Oudea predicted a better 2012 after the French bank reported a worse-than-expected 88.6 percent fall in quarterly profit in the last three months of 2011 on Thursday.

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“I’m happy with the start of the year regarding capital markets (but) I remain overall prudent for 2012," Oudea told CNBC. “Clearly the decision made by the European Central Bank with the LTRO (long-term refinancing operation – the ECB’s provision of cheap money to European banks) was key and has been key to reassure the markets regarding extreme scenarios. Still, we will have relatively mediocre economic activity. It’s not a catastrophe, but not that dynamic.”

Fourth-quarter earnings at the bank fell to 100 million euros ($130.66 million), lower than the 190 million euros ($247 million) predicted by analysts and down sharply from 874 million ($1.138 billion) a year earlier.

A 162 million euro charge ($210.8 million) on Greek sovereign debt helped drive the figures down. Corporate and investment banking were also hit hard by the euro zone debt crisis, and reported a net quarterly loss of 482 million euros ($627.3 million).

“Fundamentally we maintained the level of revenues between the first and fourth quarter,” Oudea said. Revenue was down 12.4 percent to 6.01 billion euros ($7.8 billion) – a less steep fall than earnings.

He added that the bank now had just 2.7 billion euros ($3.51 billion) of exposure to the less financially stable, peripheral euro zone countries known as the PIIGS —Portugal, Ireland, Italy, Greece and Spain.

Oudea praised the LTRO and said its effects would be felt in the real economy.

“The fact that we know we have access to that means we can continue to lend to France,” he said. “We finance the economy. It’s our role.”

France reported better-than-expected economic growth for the last quarter of 2011 on Wednesday, as it emerged that the overall euro zone economy shrank during the same period.

“Just Finland is doing better than France. The banking system is able to accompany the French economy going forward,” Oudea said.

One key factor in market confidence in France is its election later this year. President Nicolas Sarkozy, who has led attempts to stem the debt crisis with German Chancellor Angela Merkel, is battling socialist candidate Francois Hollande.

Hollande has said that he wants to separate investment banking operations from retail banks.

“We don’t want the taxpayer to be at risk with the banking system, but we don’t think the right thing is to separate the banking,” Oudea said.

He argued that the bank needed investment activity to help support retail lending.

SocGen will not pay a dividend for 2011, as it had already told the market.

Rival French bank BNP Paribas reported on Wednesday that profits fell by 51 percent in 2011, after a hefty writedown on the value of its Greek bonds, and renewed uncertainty across the euro zone. 

Jean-Laurent Bonnafé, CEO of BNP, told CNBC Wednesday: "Overall, we think 2012 will be better than the last half of 2011. We will see better market conditions, although on the other hand there could be a slowdown in the economy."