Societe Generale SA is fighting desperately to stay afloat but without the French government’s life raft this boat would already be sunk. The bank reported its fiscal 2008 second-quarter earnings on August 5, then it raised $8 billion big ones from bondholders three days later. Societe Generale SA took advantage of better-than-expected earnings to borrow $7.9 billion from bondholders this week, including its biggest sale of notes in euros since 2006.
France’s second-largest bank raised 3.95 billion euros ($5.9 billion) a day after reporting profits that sent shares up 9.4 percent, and got a further $2 billion yesterday, according to data compiled by Bloomberg. The bank accounted for more than half of total European bond sales at 6.5 billion euros, below the year’s average for a seventh week and 42 percent down on last week.
Societe Generale SA took advantage of better-than-expected earnings to borrow $7.9 billion from bondholders this week
We might point out that better-than-expected here means not dead yet. By our account , their earnings took a 63% haircut.
As Societe Generale reported a 63 percent plunge in profit, the financial press pretended to not notice how sick the bank really is. Simply being on life support doesn’t make the patient healthy.
But the bank which is still trying to can all of its problems on one mid-level trader, says everything is fine now, they are completely solid.
Six months after Societe Generale announced a record 4.9 billion-euro trading loss from unauthorized bets, Chief Executive Officer Frederic Oudea said the Paris-based bank’s capital position is “completely solid.” Its 575 million euros of markdowns on subprime-infected debt was less than half the level of the first quarter.
Completely solid is not a technical term, but one could it to mean that future capital raising will be unnecessary; is that what they mean? We might suggest that the bank lump the entire credit crisis on Knievel and the tsmui in Malaysia as well.
Nevertheless two weeks before reporting fiscal 2008 third-quarter earnings the bank had to officially deny unsightly rumors that it may need to bolster capital again: of course the notion is ridiculous the bank is completely solid; right Frederic Oudea?
Well okay the bank got a modest bail out, that’s not really capital raising is it.
BNP Paribas will get 2.6 billion euros ($3.4 billion), Credit Agricole 3.0 billion euros ($4.0 billion) and Societe Generale 1.7 billion euros ($2.3 billion).
That was announced on October 21.
Not to be outdone by its second-quarter 63% cliff dive Society General announced an 84% crash in the over the inflated Q3 2007 earnings a year ago.
Societe Generale recorded markdowns of about 1.4 billion euros in the quarter, including 447 million euros related to the bankruptcy of Lehman Brothers Holdings Inc. and 453 million euros tied to U.S. bond insurers. Chief Executive Officer Frederic Oudea decided not to use new accounting rules that are less stringent on markdowns, which helped Deutsche Bank AG show an unexpected third-quarter profit.
“We’ve decided to be prudent,” Oudea, 45, said in an interview with Bloomberg Television. “This profit isn’t artificially enhanced.”
It’s prudent to be prudent, after getting burned on guidance
Societe Generale, which published results three days ahead of schedule, said Oct. 13 that it would have third-quarter profit of about 1 billion euros before exceptional items. Loan-loss provisions tripled to 687 million euros from 226 million euros a year earlier, the bank said.
To its credit Societe Generale for all that ails it is still in the black, when many older banks don’t even exist anymore, but it exists in that same credit crunch that many older banks don’t even exist in anymore, and the future promises only fewer earnings and bigger write-downs, no bank can swim there for very long.
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