Societe Generale, France's second-biggest listed bank, posted lower than expected first quarter results Thursday after turmoil in the Arab world offset a strong performance in investment banking. SocGen is among the most exposed in Europe to Egypt and North Africa, where political upheaval hit business activity and led to a 61 per cent slide in international retail earnings. "We [felt the] impact of the turmoil in Ivory Coast, in Egypt and in Tunisia," chief executive Frederic Oudea told CNBC. But banks that had been closed were now open again, he said. SocGen is sticking to its 2012 net profit target of six billion Euros, CNBC said. Net profit for the quarter fell 13.8 per cent to 916 million Euros ($1.28 billion). The average estimate given in a Reuters poll of analysts was $1.06 billion. Revenue clocked up slightly to $6.62 billion Euros but was also below expectations of $6.73 billion. Stripping out the impact of tightening spreads on the value of its own debt, which the bank pegged at 239 million Euros after tax, revenue rose 7.7 per cent and earnings were up 9.8 per cent. "It's a really mixed bag ... There were good results in French retail and corporate and investment banking, but that could not offset the weakness in international retail banking, which was more pronounced than expected," WestLB analyst Christoph Bossmann said. Larger local rival BNP Paribas beat first quarter forecasts Wednesday with a net profit of 2.62 billion Euros, or almost three times SocGen's earnings for the same period. Meanwhile, British bank Lloyds said it would take a £3.2 billion provision to cover it for losses from the mis-selling of protection insurance and another £1.1 billion hit in Ireland. SocGen's key investment banking division accounted for nearly two thirds of group earnings in the quarter, with strong corporate financing and equity derivatives offsetting the impact of eurozone jitters, Middle East turmoil and the Japan tsunami. Rivals including Barclays, Credit Suisse and UBS saw their investment banking profits fall 15-30 per cent in the first quarter. SocGen's investment bank, less exposed to fixed-income troubles, saw earnings rise 9.2 per cent. SocGen also outperformed in its home market, with demand for mortgages and loan growth boosting French retail profits. Loan-loss provisions fell by almost a quarter across the group, and losses from toxic assets were below expectations. But the bank's international retail division, which includes subsidiaries in Eastern Europe, Greece and the Arab world, was hit by extra provisions linked to upheavals in Egypt, Tunisia and Ivory Coast. Inflation in Russia also pushed up expenses. SocGen's shares have gained 13 per cent in the year to date, better than the STOXX Europe 600 banking sector index, SX7P, as investor sentiment improves on hopes that eurozone sovereign debt problems have been overblown. However, recent capital hikes from Italian banks have cast doubt on whether SocGen has the financial firepower to meet tougher Basel III capital requirements without a cash call.
