By Fabio Benedetti-Valentini and David Whitehouse
Oct. 6 (Bloomberg) -- Societe Generale SA will seek to raise 4.8 billion euros ($7.1 billion) in a rights offer, the second in less than two years, to pay back state funds and bolster its capital position.
Societe Generale will repay 3.4 billion euros to the government, the Paris-based bank said in a statement today. Shareholders can buy two new shares for every nine held at 36 euros each, or 31 percent less than yesterday’s closing price. The stock fell as much as 3.1 percent in Paris trading.
“The pressure was increasing and it’s a good decision because the state funds represented strings attached to acquisitions, dividends and variable pay,” said Jaap Meijer, a London-based analyst at Evolution Securities who has a “sell” rating on the shares.
BNP Paribas SA, the largest French lender, and UniCredit SpA, Italy’s biggest bank, announced plans last week to raise a total of about $12 billion selling stock following a rebound in equity markets. Societe Generale, the third-largest French bank, also said it’s in discussions to buy Dexia SA’s 20 percent stake in Credit du Nord, a retail lender it already controls, and aims to conclude the talks by the end of the year.
Societe Generale fell 44 cents, or 0.8 percent, to 51.76 euros by 9:55 a.m. in Paris, leaving its gain so far this year at 44 percent. BNP Paribas and Credit Agricole SA have advanced 77 percent in 2009.
French Consumer Banking
“Retail banking in France has benefited from a growth dynamic,” the bank said in the statement, adding that “the prospects for the company’s international networks remain favorable.”
France’s five top banking networks, including BNP Paribas and Societe Generale, received about 20 billion euros from the state to boost capital and sustain lending after Lehman Brothers Holdings Inc.’s failure shook markets last year.
Societe Generale received 3.4 billion euros, half in subordinated debt and half through preferred shares. Until BNP Paribas announced plans to raise capital, Societe Generale said it wouldn’t make a decision on reimbursing the government before the start of 2010.
Societe Generale in March 2008 raised 5.5 billion euros in a rights offer to replenish capital depleted by a record 4.9 billion-euro trading loss the bank blamed on unauthorized positions amassed by employee Jerome Kerviel.
The share sale announced today will run from Oct. 8 through Oct. 20, and rights to purchase the shares will trade on the stock market. Societe Generale’s corporate and investment bank will lead a group of banks underwriting the offering.
Risky Asset Impact
In the third quarter, the negative impact at Societe Generale’s investment bank from risky assets was “moderately above” the second quarter’s level, and will be booked mostly as provisions, the bank said. In the second quarter, the investment-banking unit had 397 million euros of “losses and writedowns” from risky assets.
The bank also reduced by more than half in the third quarter the negative effects of marking to market its credit default swaps, and from the improvement in its own debt. In the second quarter, Societe Generale booked 840 million euros of CDS markdowns and 459 million euros of losses “from the tightening of Societe Generale credit spreads,” the bank said Aug. 5.
Societe Generale said the reorganization it’s carrying out will have a positive impact on gross operating profit of 430 million euros in 2009 and 1 billion euros in 2010. The bank said that it will pay out between 35 percent and 40 percent of net income as
Tuesday, 6 October 2009
Societe Generale Seeks EU4.8 Billion in Rights Offer
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