Soc Gen sees profits drop as it scales back its investment arm
FRENCH lender Société Générale (SocGen) yesterday reported a drop in profits after it cut lending in its investment bank, despite a rise in trading.
The bank’s net profits were down 20 per cent to €732m in the first three months of 2012 compared to the same period last year, although, stripping out the effect of an accounting loss, that rises to €851m.
But increasingly stringent capital requirements are forcing SocGen to continue with speedy deleveraging. The bank ditched €6.4bn of investment banking assets during the first quarter of this year, but it managed to contain the losses on them to a relatively light €226m.
The disposals were needed to boost its core tier one capital ratio by 25 basis points under Basel III standards, which will be phased in from January next year.
SocGen said it intends to add 70 basis points to its capital base by the end of this year, implying that billions more in deleveraging is ahead and raising the prospect of further losses. But despite shrinking its balance sheet, the corporate and investment bank booked a rise in revenues from €65m at the end of last year to €1.9bn this year. The bank also managed to pare down its loan-to-deposit ratio to 118 per cent.
SocGen’s Frederic Oudea said the bank’s strong start to the year gave him confidence in the future despite a “morose” economic outlook.