SocGen Says Writedowns and Debt Provisions Loom

Societe Generale
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Societe Generale said on Wednesday that its quarterly earnings would be hit by hundreds of millions of euros of one-off charges.

The bank said it would write down an unspecified portion of 384 million euros ($510.58 million) in goodwill on its balance sheet for brokerage Newedge in the fourth quarter, and would take a charge on its own debt of more than 605 million euros.

SocGen shares fell as much as 4.9 percent following a closed-door briefing late on Tuesday by the French bank's outgoing Chief Financial Officer Bertrand Badre, who analysts said told them about the write-downs and the possibility of rising loan losses.

The bank later confirmed Badre's comments to Reuters and the stock trimmed its losses to 2.8 percent by the close.

"The message is bearish for Q4,with large one-offs ... probably resulting in a net loss," Cheuvreux analyst Cyril Meilland wrote in a research note downgrading the stock to "underperform" from "outperform."

Meilland added that rising loan-loss provisions in French retail banking and a lack of recovery in Russia and Romania were also likely to have squeezed earnings in the final three months of 2012.

One analyst who did not attend the briefing, said the impairment from Newedge, a joint venture with Credit Agricole, were previously known but described the figures for the own-debt charge as"enormous".

Other analysts, who attended the dinner with Badre - who is leaving in March to become CFO of the World Bank, said the message was also gloomy for 2013, where a stagnant French economy is likely to increase loan losses.

"The feedback provided was negative in our view, mainly with respect to a distinct deterioration in French retail cost of risk,"Espirito Santo analyst William Davison wrote in a research note, referring to bad debt provisions.

On a positive note SocGen said it expected to reach a 100 percent liquidity coverage ratio this year after a decision by global regulators earlier this month to give banks more time and flexibility to build cash reserves.

'A Big Dilemma'

Some analysts criticized the bank's selective disclosure of the financial data.

French market regulations require listed companies to provide "equal and simultaneous access in France" to any information made available to investment analysts, according to the website of the AMF stock market watchdog which said it was in contact with SocGen and was "following the matter closely".

"It's a big dilemma but it's done almost every day, at least with the French banks," one Paris-based analyst said when asked about the analyst meeting, which he said took place at Cafe Lenotre, an upmarket venue on the Champs Elysees.

Colette Neuville, president of minority shareholder defence group ADAM, said companies were definitely barred from providing outlooks during the "blackout period" starting a month to 15 days ahead of the publication of results but that such disclosures were otherwise "a grey area".

SocGen declined to comment on the disclosure issue. Mirabaud Gestion AM General Director Marco Bruzzo said overall SocGen's message was "globally optimistic but that the economic environment was still challenging."

He said the bank's shares had rallied strongly and that some investors could be taking profits. As of Tuesday's close, they had risen 18 percent since the start of the year.