Societe Generale SA on Wednesday blamed its worse-than-expected second-quarter profit on write-downs on assets in the United States and Russia.
France’s second-largest lender by market value reported that its net profit in the three months that ended in June fell to 433 million euros ($533 million) from 747 million from the same period of last year. That came in well below analyst forecasts of 764 million euros. Total revenue fell 3.6% year-over-year to 6.27 billion ($7.72 billion). Corporate and investment banking revenue fell 33% to 1.22 billion euros in the quarter.
The write-downs came to 250 million euros from its Russian Rosbank bank after it was merged with Societe Generale’s Russian retail bank SG Vostok, and 200 million euros from Los Angeles-based TCW Group, which faced deteriorating market conditions.
The bank’s core Tier 1 ratio, a key measure of a lender’s capital strength composed of only top-quality capital such as equity and retained profit, was 9.9% at the end of June under Basel 2.5 rules. That was up from 9.4% at the end of March. Societe Generale said it would meet its target of a 9% to 9.5% core Tier 1 ratio under Basel 3 rules by the end of 2013.
Societe Generale, like other EU banks, has struggled as Europe’s sovereign debt crisis unfolded. Two of Europe’s largest financial institutions, Deutsche Bank AG (NYSE: DB) of Germany and UBS AG (NYSE: UBS) of Switzerland, reported on Tuesday that profits plunged in the second quarter as declines in trading activity weighed on the firms’ investment banking units.
Societe Generale has lost almost half its value over the past year. Deutsche Bank, UBS, Barclays PLC (NYSE: BCS) (the British bank that is also at the heart of the Libor scandal), Banco Santander SA (NYSE: SAN) and National Bank of Greece SA (NYSE: NBG) have all lost between about 25% and 40% of their value over the past year.
BNP Paribas shares its results on Thursday, while Credit Agricole SA reports later in the month.