Europe Markets

SocGen profit tumbles on Russia unit writedown


French bank Societe Generale reported a 13.3 percent drop in first-quarter net income as it booked a 525 million euro ($731 million) writedown on its Russian business as turmoil in Ukraine persists.

Net profit came in at 315 million euros for the quarter down from 364 million this time last year. The stock was down 1.9 percent in early trade.

The group said the first three months of the year were marked by the emergence of the crisis in Ukraine as it confirmed its purchase of a further 7 percent stake in Russian bank Rosbank last month, taking its stake to 99.4 percent.

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Logos of French banks Societe Generale, Credit Agricole and BNP Paribas
Damien Amien Meyer I AFP I Getty Images

The weak rouble, growing uncertainty concerning the environment and delayed performances prompted the bank to write down goodwill on Russian activities, the group said in a statement.

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The bank said it remained confident about Rosbank's medium- and long-term prospects in Russia and confirmed its long-term view of the potential of the Russian banking market.

On May 13, the group will present its three-year development strategy for Russia, where it will outline how it intends to achieve satisfactory profitability in 2016 in a scenario of "gradually easing tensions", adding that Russia represents 3 percent of its global exposure and that it has no material exposure to Ukraine.

Revenue in the quarter rose 14 percent to 5.68 billion euros from 4.98 billion a year earlier, lifted in part by a strong financial services business.

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At the same time, fellow French bank Credit Agricole, France's third largest bank by assets saw net income rise 29.6 percent in the first quarter of the year compared to the same period last year, as cost cutting measures imposed by the group came into effect.

The bank's operating expenses fell by 1.2 percent in the quarter and loan loss provisions were down 20 percent. The group also announced it has finalized the sale of its stake in brokerage Newedge to Societe Generale.

Chief executive Jean-Paul Chifflet said he was "committed to a serious and controlled management of costs".

Correction: A breaking news alert for this story provided an incorrect figure for SocGen Q1 net income. The correct figure is 315 million euros