Paris (AFP) – Shares in Societe Generale tumbled on Friday as the French bank reported weak earnings with scandals over alleged bribery and possible rate rigging still hanging over the lender.
The bank, one of the largest in France, booked a net profit of 850 million euros ($1.0 billion) in the first three months of the year, a slight improvement on analysts’ expectations.
But revenue was down 2.8 percent to 6.3 billion euros, the bank said in an earnings statement.
Analysts at Jefferies called the results “disappointing”, pointing to weakness in corporate and investment banking operations, partly due to the bank’s exposition to global market’s hit by a weaker dollar.
And a surprise shake-up among top executives following another sudden departure also unrattled investors at a time when the bank is still facing legal headwinds over allegations of bribery in Libya as well as an interest rate inquiry in the United States.
“The unexpected management changes aren’t helpful at this time” given the ongoing litigation risks, said the Jefferies analysts.
While the bank’s board confirmed that Frederic Oudea, seen as a pillar of stability, would remain CEO for another four years, other top managers have been replaced, the bank said Thursday.
Oudea will have a new deputy in charge of global banking and investing, Severin Cabbanes, after the sudden departure of Didier Valet earlier this year.
And the bank said Friday that his deputy in charge of retail banking, Bernardo Sanchez Incera, is stepping down to be replaced by Philippe Aymerich.
– Huge settlement costs –
Investors reacted swiftly to the news, with the bank’s share price diving 6.0 percent in midday trading on the Paris stock exchange.
Societe Generale sought to assuage investors’ fears by saying that French retail banking revenues were “still impacted by the low interest rate environment, but (were) expected to stabilise in 2018”.
It also said its results were “generally in line” with its strategic plans following an overhaul of management and a slump in profits by more than a quarter in 2017.
But the group is still licking its wounds after seeings its profits tumble in the second quarter of last year due to the cost — nearly a billion euros — of settling a lawsuit over a bribery scandal in Libya.
And the legal woes weighing on the lender since the Libyan Investment Authority sued Societe Generale in 2014 over allegedly channelling bribes to allies of slain dictator Moamer Kadhafi’s son have yet to end.
In March, the lender said it was due to settle “in the coming weeks” parts of the dispute that have yet to be closed.
Separately, Societe Generale is also under investigation in the United States over the alleged rigging of the Libor interest rate, a global benchmark for financial institutions.
The bank said Friday that it had set aside 1 billion euros to settle these two disputes — but that this payout would not put a dent to its accounts as the sum has already been set aside for use on a rainy day.