Societe Generale SA said yesterday its net profit fell by half in the second quarter as the French bank took higher writedowns on its exposure to exotic securities and greater financial liabilities.
France’s second-largest bank reported net profit of 309 million euros (US$445 million) for the three months ended June 30, down from 644 million euros a year earlier.
The Paris-based bank’s earnings were hit by non-recurring losses of 1.7 billion euros, which included new writedowns on the value of credit default swaps as well as the bank’s financial liabilities.
The bank took a total of 3.6 billion euros in writedowns for non-recurring items in the first half, leaving its net profit for the six months ended June 30 at 31 million euros, compared with 1.74 billion euros in the same period a year earlier.
Operating profit fell by more than half in the second quarter to 534 million euros, while revenue rose 2.4 percent to 5.72 billion euros, the bank said.
In a statement, Societe Generale Chairman Frederic Oudea said the bank “is focusing on consolidating its market share, controlling risks and restructuring the activities most severely affected by the crisis in order to adapt to the new environment and prepare for the future.”
The results compare poorly with Societe Generale’s big domestic rival, BNP Paribas, which on Tuesday reported a quarterly profit of 1.6 billion euros.
The bank’s Tier One ratio, seen as a key measure of a bank’s financial health, improved to 9.5 percent at the end of June, up from 9.2 percent at the end of March. The improvement was partly attributable to the bank’s decision to not buy back any of its own shares during the second quarter and hold onto its capital.
Meanwhile, Lloyds Banking Group PLC, part owned by the British government after a bailout, yesterday reported a loss of £3.1 billion (US$5.3 billion) for the first half of the year as bad loans rose to a record high.
The bank expressed confidence that the worst part of the bad debt burden was over and that earnings would improve.
“With impairments anticipated to have peaked in the first half, management expects the group’s results to improve in the second half and through 2010,” chief executive Eric Daniels said.
The partly nationalized bank reported that impairments rose from £2.5 billion to £13.4 billion — 80 percent stemmed from Halifax/Bank of Scotland (HBOS), which was taken over by Lloyds TSB.
Although the merged company’s revenue was 7 percent higher at £11.9 billion, Lloyds posted a pretax loss of £3.96 billion. Pro-forma figures assume that HBOS was part of the company from Jan. 1 and excludes certain exceptional items.
“Our first-half loss was driven by the high levels of impairment. The core business delivered a resilient performance, despite the weak economy,” Daniels said.
The company said it expected weak growth in the British economy next year.
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