SocGen investment bank beats view despite scandal
LONDON, Aug 5 (Reuters) - Societe Generale's (SOGN.PA) investment bank posted better-than-expected results on Tuesday despite being hit by the world's biggest rogue trading loss, easing fears it might ask investors for even more cash.
Second-quarter revenues at SocGen's corporate and investment banking (CIB) unit fell 68 percent to 663 million euros ($1.03 billion), including a 1.2 billion euro hit due to the credit crunch and from writedowns on credit default swaps and credit derivatives.
"Adjusted for these writedowns, operating revenues with 1.89 billion euros were very strong," West LB analyst Christoph Bossmann said in a note, chiming with Citi and JPMorgan analysts who had both forecast lower CIB revenues.
Second-quarter results from leading investment banks have been mixed so far, with Merrill Lynch MER.N posting a much larger-than-expected loss but Citigroup (C.N) surprising to the upside, despite $11.7 billion in writedowns.
The numbers soothed market fears the French bank might need to ask for more capital after the rogue trading scandal surrounding 31-year old junior trader Jerome Kerviel forced it to raise 5.5 billion euros through a rights issue.
"Capital raising is less of a concern, clearly, or no concern at this point, based on what we've seen today," JPMorgan analyst Kian Abouhossein said.
France's second-biggest bank by market value posted a 63 percent drop in second-quarter group net profit to 644 million euros ($1 billion) on Tuesday, still beating analysts' forecasts and boosting its shares by 7 percent.
In January, the bank unveiled 4.9 billion euros of losses it said were caused by unauthorised deals carried out by Kerviel.
Despite tighter controls introduced after the scandal, "trading activities posted very satisfactory results, particularly for arbitrage activities", SocGen said.
The bank has a programme in place called "Fighting Back" designed to strengthen its risk controls, SocGen CEO Frederic Oudea told reporters on Tuesday.
CIB posted the third-best performance on record in client-driven revenues, SocGen said.
Equity and fixed-income products had their best revenue quarter on record, while equity trading revenues bounced back compared with the previous three quarters, Citi analysts said.
"The bank's franchise in equity derivatives, where SocGen has a market-leading position, is not affected by the current financial crisis," WestLB's Bossmann added.
"We forecast the negative impact of the crisis (on CIB) to ease in the coming quarters."
Kerviel remains under formal investigation for breach of trust, computer abuse and falsification. (Additional reporting by Sudip Kar-Gupta in Paris; Editing by Andy Bruce)
