PARIS — Societe Generale SA Thursday reported a multibillion fourth-quarter loss in the wake of a trading scandal, and it launched a EUR5.5 billion rights issue that it hopes will garner the funds needed to pursue growth and remain an independent entity.
France's second-largest bank by market value, which earlier reported subprime-related writedowns of EUR2.6 billion at its investment bank, also warned that it could be forced to take a further hit from liquidity issues at its asset-management division. It didn't specify the amount but said the writedown could be booked in the first quarter.
SocGen, meanwhile, confirmed its fourth-quarter net loss of EUR3.35 billion, after a year-ago net profit of EUR1.18 billion. For the full year, SocGen confirmed that it made a net profit of EUR947 million, down 82% from EUR5.22 billion in 2006.
It had released preliminary numbers Jan. 24 and Feb. 11 after it revealed a hit of about EUR4.9 billion, blamed on what it alleges was a rogue trader.
SocGen's asset-management division said more writedowns could be possible if the current credit crisis persisted. In 2007, it booked EUR276 million in losses and writedowns related to the credit crunch. The losses stemmed from the company stepping in for customers looking to withdraw from money market funds, it said.
"The purchase of assets originating from SGAM funds invested in credit-type underlyings could continue in the first quarter 2008 and, given the situation in the credit markets, lead to further writedowns," SocGen said.
Analysts say that the recent trading scandal, management crisis and subsequent reduction in share price have made SocGen more vulnerable to a takeover. However, the further writedown fears and a newly published audit report exposing flawed internal security systems could discourage any immediate takeover bids for the troubled bank, which has a market capitalization of EUR33 billion, second behind cross-town rival BNP Paribas SA's EUR54 billion.
BNP Paribas, which is looking at SocGen, said at its full-year results conference Wednesday that the situation remains too complex to draw any final conclusions yet.
Also a key factor to the bank's future as a standalone operation will be the planned EUR5.5 billion capital hike, which was announced the same the day the trade scandal broke and which kicked off Thursday.
The rights issue, which runs until Feb. 29, is underwritten by several international investment banks, but a lack of interest from SocGen's investors could prompt management to speed up its search for a merger partner.
At 1514 GMT, SocGen shares were down EUR0.54, or 0.8%, at EUR65.88 in an overall upbeat market. The stock has lost roughly half of its value this year.
SocGen's results came a day after it unveiled the results of an internal audit, conducted in the wake of the trading scandal. It said that the audit showed that SocGen employees failed to "systematically" check unauthorized trades and certain controls were lacking.
The committee proposed a number of security measures in addition to what the bank itself announced to prevent other similar cases from happening. An international audit firm will review the new measures and make its assessment public before the annual shareholders meeting in May.
In its results presentation Thursday, SocGen also confirmed that its corporate and investment bank was hit by EUR2.6 billion in previously announced writedowns related to its exposure to unhedged CDOs, monoline insurers and residential mortgage-backed securities.
Its French and international retail division, by contrast, posted healthy figures, escaping the effects of subprime-related fallout, SocGen said.
SocGen confirmed that it would slash its 2007 dividend to EUR0.90 a share from EUR5.20 the year before.
Full-year revenue fell by 2.2% to EUR21.92 billion from EUR22.42 billion in 2006. Fourth-quarter revenue plunged 32% to EUR3.88 billion from EUR5.67 billion a year-earlier.
