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SocGen knocks shares with warning of fourth quarter pain
January 16, 2013 / 2:40 PM / 5 years ago

SocGen knocks shares with warning of fourth quarter pain

* Write-downs loom on Newedge, SocGen's own debt

* Disclosures came at private dinner

* Bank declines to comment

* Shares lose up to 4.9 pct

By Christian Plumb

PARIS, Jan 16 (Reuters) - Societe Generale shares fell as much as 4.9 percent on Wednesday after the French bank's outgoing chief financial officer told analysts about fourth-quarter write-downs and rising loan losses.

Bertrand Badre, who is leaving in March to join the World Bank, said at a private dinner on Tuesday the bank faced a goodwill impairment from restructuring brokerage Newedge of between 200 million euros to 384 million euros and an accounting loss on its own debt of up to 1 billion ($1.33 billion), according to analysts who attended.

"The message is bearish for Q4, with large one-offs ... probably resulting in a net loss," Cheuvreux analyst Cyril Meilland wrote in a research note downgrading the stock to "underperform" from "outperform."

The one-offs included the accounting loss on the bank's debt and possible goodwill impairment, Meilland said. He added that rising loan-loss provisions in French retail banking and a lack of recovery in Russia and Romania were also likely to have squeezed earnings in the final three months of 2012.

A Societe Generale spokeswoman declined to comment on the dinner with about 25 analysts from London and Paris. She also did not confirm Badre's remarks, which were not made public.

The French bank led a fall in share prices across the European bank sector, which has gained about 45 percent since June last year. The banks have benefited from central bank efforts to stabilise Europe's financial markets but investors remain concerned about weak fundamentals given the banks' exposure to euro zone economies.

Other analysts, who attended the dinner, said the message was also gloomy for 2013, where a stagnant French economy is likely to increase loan losses.

"The feedback provided was negative in our view, mainly with respect to a distinct deterioration in French retail cost of risk," Espirito Santo analyst William Davison wrote in a research note, referring to bad debt provisions.

'UNLEVEL PLAYING FIELD'

Some analysts criticised Societe Generale's failure to disclose more widely what they said verged on a profit warning.

French market regulations require listed companies to provide "equal and simultaneous access in France" to any information made available to investment analysts, according to the website of the AMF stock market watchdog. The AMF did not immediately return a phone call seeking comment.

But analyst meetings with companies which hint at outlook changes are not uncommon in France.

"It's a big dilemma but it's done almost every day, at least with the French banks," one Paris-based analyst said when asked about the analyst meeting, which he said took place at Cafe Lenotre, an upmarket venue on the Champs Elysees. "If you give some guidance to analysts who then forward it to their customers you can say that it's an unlevel playing field."

Another analyst, who did not attend the meeting, said the Newedge impairment had been previously disclosed but that the figures cited for the own-debt charge were "enormous."

"The rule is that if there is a new number that is price-sensitive for the stock, then it must be disclosed to the public," he said.

Colette Neuville, president of minority shareholder defence group ADAM, said companies were definitely barred from providing outlooks during the "blackout period" starting a month to 15 days ahead of the publication of results but that such disclosures were otherwise "a grey area."

"This situation where analysts have the right to meet with companies ahead of everybody else is a serious issue with regard to equal access to information," she said.

Some analysts saw a silver lining in Badre's comments.

Marco Bruzzo, head of fund management at Mirabaud in Paris, said the CFO's message was "globally optimistic but that the economic environment was still challenging."

He said the bank's shares had rallied strongly and that some investors could be taking profits. As of Tuesday's close, they had risen 18 percent since the start of the year.

Kepler analyst Benoit Petrarque, who attended the dinner, summed up the message as "overall cautiously positive, with difficult European macro but improving funding conditions and a more stable regulatory outlook for 2013." ($1 = 0.7492 euros) (Reporting by Christian Plumb; Additional reporting by Steve Slater, Lionel Laurent and Blaise Robinson. Editing by Jane Merriman)

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