SocGen blames rocky markets for its profit warning
* Lender to book 240 mln euros in asset sales charge
* Tough market conditions to hit CIB arm
* Sees flat dividend
* SocGen shares fall, knocks down shares of rivals
(Adds analysts' comments and more detail)
By Sudip Kar-Gupta and Inti Landauro
PARIS, Jan 17 (Reuters) - French bank Societe Generale
warned that volatile markets would hurt its fourth
quarter profit, hitting its shares and other banks which have
yet to report earnings.
SocGen, whose traditional strength is in stocks and equity
derivatives, said it expected a drop in revenue of around 20
percent compared to last year in its global markets and investor
That update comes in the same week that larger U.S. rival JP
Morgan missed market estimates for its fourth-quarter
results, with the lender also blaming volatile markets.
With its fourth quarter and full-year results due on
February 7, SocGen closes a year which has seen its French
retail activity shrink and billions of dollars paid to settle
legal disputes with the U.S. authorities.
Shares in SocGen were down by 3.7 percent in mid-session
trading, among the worst performing stocks on Paris' benchmark
The shares of French rivals such as BNP Paribas
and Credit Agricole also fell, as analysts said
SocGen's warning augured badly for European banks which have
lagged their Wall Street peers.
Analysts said that while difficulties in bond trading could
have been expected, given similar warnings this week from top
U.S. banks, SocGen's issues in equities were harder to explain.
"We would not have expected this kind of setback in
equities, an area in which the U.S. banks have held up
relatively well," wrote CM-CIC Securities in a note.
On the other hand, Viola Risk Advisors had warned recent
volatility was threatening the bank's trading and hedging
Markets have been shaken by concerns over a slowing global
economy and the lingering trade dispute between the United
States and China.
However, JP Morgan this week still managed to post higher
equities trading revenue, while Goldman Sachs also
reported higher equities trading revenues.
"I have a preference for the U.S. banks. SocGen shows how
tough things are for European banks," said Jerome Schupp, fund
manager at Geneva-based investment firm Prime Partners.
SocGen added it would book a one-off charge of 240 million
euros ($273 million) as a result of some disposals carried out,
such as the sale of its Serbian unit and its stake in La Banque
Investors will now follow with particular scrutiny the
fourth quarter reports from other large European banks which are
expected over the next few weeks.
In December, SocGen's smaller French rival Natixis
reported 260 million euros of losses and provisions during the
fourth quarter on poorly performing Asian derivatives.
Last week, BNP Paribas, the other larger global-oriented
French bank made the decision to close its proprietary trading
desk, Opera. The bank also said it will close a commodity
trading desk it ran in New York.
Analysts interpreted these moves as attempts to reduce
exposure to market volatility.
SocGen said its 2018 dividend would be stable compared with
last year's 2.20 euros per share, and it expected the core tier
one-capital ratio to be between 11.4 percent and 11.6 percent as
a result of the losses on equities.
($1 = 0.8781 euros)
(Reporting by Sudip Kar-Gupta and Inti Landauro;
Additional reporting by Matthieu Protard;
Editing by Sherry Jacob-Phillips and Elaine Hardcastle)
First Published: 2019-01-17 10:24:39
Updated 2019-01-17 13:16:35
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