Societe Generale said Thursday that profits slumped by more than a quarter last year, as the French bank counts the cost of an ongoing restructuring and digitalisation.
The lender said it also took a hit from US President Donald Trump's tax reforms and warned that it could face a possible one-off tax charge related to the massive losses incurred in 2008 by "rogue trader" Jerome Kerviel. Societe Generale said in a statement that its net profit fell by 27.6 percent to 2.81 billion euros ($3.5 billion) in 2017.
Revenues or banking income declined by 5.3 percent to 23.9 billion euros. Nevertheless, chief executive Frederic Oudea insisted that the group's revenue performance was "good" given the current "mixed environment."
"2017 was another important and positive milestone in the group's ongoing adaptation of the business model (and) implementation of a new more agile organisation," Oudea said. The group's 2017 results "reflect the healthy commercial momentum of all our businesses, the disciplined management of our costs and risks and the improvement in our underlying profitability," the CEO said.
"We are starting 2018 with confidence... in an economic and financial environment that should gradually be more favourable." Societe Generale said its bottom line had been impacted by a number of exceptional items in the fourth quarter, notably the expense related to the acceleration in the adaptation of its French retail banking network, "the effects of the tax reforms in France and the United States and a tax rectification proposal" by the French tax authorities.
In September, a French court ruled that Societe Generale was mostly to blame for ex-trader Kerviel losing 4.9 billion euros in 2008 due to "woefully inadequate" internal checks. The bank had been awarded tax breaks by the French state in 2009 and 2010 as part of a scheme aimed at protecting businesses facing huge losses or being victims of fraud.
But the government said in September it would review that in light of the ruling which held the bank overwhelmingly responsible. Societe Generale insisted that "this tax rectification proposal has no immediate effect" and believed "such a situation will not occur for several years."
"In the event that the authorities decide, in due course, to confirm their current position, the Societe Generale group will not fail to assert its rights before the competent courts," the bank added. Despite the overall profit decline, investors bought into Societe Generale shares on the Paris stock exchange following the announcement, with analysts saying the bank's fourth-quarter performance had actually been better than expected.
Fourth quarter net profit was 69 million euros, against market consensus forecasts of a loss. Societe Generale shares were up four percent in late morning Paris business in an overall softer stock market.
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