Shares in Europe’s banks fell 1 percent yesterday after France’s Societe Generale warned it will take a 1.4 billion euro (US$2 billion) hit from risky assets, and worries lingered about the threat that lawmakers will impose more taxes on the sector.
SocGen shares were down 4 percent by 0841 GMT, the worst performer in Europe’s DJ Stoxx European bank index. The DJ Stoxx bank index was down 0.7 percent at 229 points, after falling to 228.2, down for a third consecutive day.
SocGen’s warning served as a reminder of the scale of toxic assets still hobbling the international banking industry following the global financial crisis, although some analysts said the French bank was more exposed and it should not hit the rest of the sector too hard.
“We have consistently said that SocGen was the only bank left that still had a significant loss to take in structured credit,” said Arturo de Frias, analyst at Evolution Securities.
De Frias rated SocGen as a “sell” in a 2010 preview note issued on Dec. 7, citing the threat of more writedowns on toxic assets due to “significant legacy issues.”
“They seem to have decided to do this quarter after quarter rather than in one go,” he said yesterday, adding that other banks should not have to take further big writedowns.
SocGen’s writedowns were mainly on collateral debt obligations (CDOs) of residential mortgage-backed securities, changes in the mark-to-market valuation of credit default swaps (CDS) and the revaluation of financial liabilities.
The French bank also said its fourth-quarter net income in investment banking would be down from the third quarter, especially in fixed income. Analysts said a slowdown had been expected across the industry, which could see disappointment in results in the coming weeks.
A backlash against bank bonuses is also raising concern the sector will be hit by increased taxes or measures to rein in payouts, possibly hurting profits.
US BANK TAX
US President Barack Obama was scheduled to announce plans today to raise up to US$120 billion from major US financial firms to cover expected losses from a taxpayer-funded bank bailout, a senior administration official said, adding to a one-off levy on bonuses already announced in Britain and France.
The US$120 billion recovery goal is the most that administration officials expect to lose from the US government’s US$700 billion Troubled Asset Relief Program (TARP) that bailed out banks, automakers and other financial firms.
Most of the TARP losses are expected to come from auto industry rescues and the bailout of insurance conglomerate American International Group Inc.
Details of the fee are expected to be spelled out when Obama releases his 2011 budget next month. The US Congress would have to approve any fee plan.
The administration official said Obama’s plan has been in the works since August and would seek modifications to the law that sent billions of dollars in bailout money in 2008 and last year to a flailing Wall Street that was approaching collapse.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS