Societe Generale has posted a slump in quarterly profits; it was hit by charges including losses on money it has loaned to Greece.
France’s second-biggest listed bank also said it would not be paying a dividend to shareholders this year to preserve its capital reserves and would be cutting bonuses paid to staff.
Third-quarter profit fell to a worse than expected 622 million euros, down by nearly a third from the same period last year.
SocGen is the first French bank to scrap its dividend since regulators unveiled tougher capital requirements earlier this year.
It stressed that it would plug an estimated 2.1 billion euros shortfall without a capital increase or state help.
French Finance Minister Francois Baroin said he was glad SocGen was moving to get its house in order. “The fact that they announced they’re not paying out a dividend and won’t seek public funds is a step in the right direction and is in line with what we’ve suggested,” he told reporters in Brussels.
SocGen is cutting debt and selling assets at its investment bank, a crucial driver of profit but one which is struggling amid volatile markets. The division’s profit slumped 83.5 percent in the third quarter to 77 million euros, with fixed income especially hard hit by the sovereign crisis.
A London-based analyst said underperformance at the investment bank looked to be the main reason for the earnings disappointment. “The big miss versus consensus was the investment bank … It is a tolerable thing because it shows them pulling back from certain activities.”
SocGen’s French high street division performed solidly, with profit up 15 percent, driven by growth in mortgage lending and signing up new customers.
SocGen is the latest in a series of European banks to cut exposure to euro zone sovereign debt. Between September and October the bank’s holdings of peripheral euro area debt fell to 3.43 billion euros, from 3.65 billion. However, holdings of Italian debt rose slightly, to 1.57 billion euros, from 1.55 billion.
SocGen is also exposed to Greece via its local subsidiary Geniki, part of an international retail network that saw profit fall almost 40 percent in the quarter.
Greek losses drag SocGen profit down