Société Générale Profit Soars

By Noémie Bisserbe 

PARIS--French bank Société Générale SA said Thursday that fourth-quarter net profit soared, bouncing back from a hefty fine imposed by European regulators for colluding with other lenders to manipulate key benchmark interest rates.

The Paris-based lender, France's third-largest listed bank by assets, said net profit rose 79% to EUR511 million ($577.14 million) in the three months through December, from EUR191 million a year earlier.

The bank's fourth-quarter profit in 2013 was hurt by a EUR445.9 million fine by the European Commission after a probe found that one of its employees participated in the alleged rigging of the euro interbank offered rate, or Euribor.

Société Générale's quarterly earnings highlight the healthy growth of investment banking revenue, lifted by its equity and fixed income business. The bank, however, could continue to suffer from its exposure to Russia, where it owns one of the country's largest private lenders, Rosbank. While Russia currently accounts for only about 5% of the group's total revenue, Société Générale once had big ambitions in the country, betting that Rosbank would help drive growth as Europe struggled to pull itself out of the financial crisis.

Société Générale's Russian business posted a EUR11 million net loss in the fourth-quarter, hurt by the sanctions on Moscow, a faltering economy and a weak ruble.

In France, retail banking net income also fell by 16% to EUR241 million in the fourth-quarter, dented by a stagnating economy and low interest rates.

However, net income for its global banking and investor solutions division, which includes investment banking, security services and asset management, jumped to EUR407 million compared with a loss of EUR184 million in the same quarter last year.

The bank confirmed its target of a return on equity--a gauge of profitability--of 10% by 2016 compared with 7.3% last year, excluding exceptional gains and potential penalties.

Société Générale, under investigation by U.S. authorities for alleged sanction breaches, increased its total provision for litigation by EUR200 million to EUR1.1 billion in the quarter.

Société Générale's core tier-one ratio, which compares top-quality capital such as equity and retained earnings with risk-weighted assets, stood at 10.1% on Dec. 31, down from 10.4% at the end in September.

The bank proposed a cash dividend of EUR1.2 a share for 2014.

Fourth-quarter revenue increased by 7.5% to EUR6.12 billion from EUR5.70 billion in the same period last year.

Last week, French rival bank BNP Paribas SA reported a jump in fourth-quarter net profit to EUR1.3 billion, as it climbs back from a record U.S. fine for sanctions violations last year.

Write to Noémie Bisserbe at [e-mail]

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