Societe Generale shares slump as profit drops

PARIS — Shares in Societe Generale fell on Friday after the French banking giant posted sinking profits and downplayed the impact of an unauthorised trading "incident" in Hong Kong last year.

Societe Generale's stock price initially jumped almost 6 per cent to 27.30 euros ($29.28) in initial trades after the group released its first-quarter earnings, which fell but were slightly better than forecast.

But shares retreated halfway into the session in Paris, falling almost 6 per cent after Chief Executive Slawomir Krupa held a conference call with financial analysts.

The call raised doubts over some financial objectives and gave the impression of a management team "on the defensive", an analyst told AFP on condition of anonymity.

Profit after tax sank by 21.7 per cent to 680 million euros compared with the same period last year, the group said, while revenues fell 0.4 per cent to 6.6 billion euros.

The bank's earnings were slightly better than forecast by analysts surveyed by financial data firm FactSet and Bloomberg.

"Our operating performance improved," Krupa said in the earnings statement, citing the "strong contribution" from Societe Generale's investment banking business.

The global banking and investor solutions arm posted a net profit of 690 million euros, a 26.4 per cent jump from a year ago, though its revenues fell 5.1 per cent to 2.6 billion euros.

Net profit at its French retail and private banking and insurance activities reached 27 million euros in the first quarter, a fourfold drop from the same period last year.

Krupa was also asked about the trading incident, which was reported by Bloomberg and then confirmed by the bank earlier this week.

The event "had no impact either on the group or on the group's clients", Krupa said in a press conference.

"It was properly detected by our [risk] control system, which shows its effectiveness," he said, adding that it led the bank to "take immediate measures".

Two traders based in Hong Kong took positions on the Indian market that they were not authorised to take and were belatedly detected by Societe Generale.

While the bank did not lose money in the transactions, it could have cost hundreds of millions of dollars if there had been an intense market downturn, Bloomberg said.

The incident rekindled memories of rogue trader Jerome Kerviel, whose deals cost the bank 4.9 billion euros in 2008 after they turned sour.