Exclusive Wealth Management Insights from WealthInsider

Alison Steed

French banking group Société Genérale said its first quarter net profit fell to €1.096 billion ($1.703 billion) from €1.431 billion a year earlier as the impact of tougher markets and a recent financial scandal took its toll.

The result beat analysts' estimates, however, and the Paris-based bank pledged to keep expanding in businesses and markets with strong potential.

In its private banking arm, meanwhile, SocGen said it recorded a net inflow of €400 million during the quarter, slowing down from the inflow of €2.0 billion a year before. Assets under management at this business segment were €71.7 billion at end-March, compared with €76.9 billion at the end of last year. Operating expenses, meanwhile, were 14.8 per cent higher year-on-year, reflecting recruitment and other costs.

Meanwhile, the corporate and investment banking business had write-downs of €1.179 billion that were offset by gains from one-off items.

A Thomson Financial consensus forecast showed analysts had expected SocGen's net profit in the quarter to fall to €988 million. Some analysts had expected additional net provisions would total around €800 million.

The bank said it will be able to keep expanding because its financial situation is solid after the €5.5 billion capital increase it launched after losing €4.9 billion amid the financial scandal.

That loss involved unauthorised trading and the bank's decision to unwind related market positions as soon as it discovered the “exceptionally serious event,” at a time when financial markets were falling sharply. This occurred in January, but SocGen put the losses into last year's fourth quarter when accounting for them, Thomson Financial noted in a report.

The bank said it had a Basel II Tier 1 capital ratio - a key measure of a bank’s financial strength - of 8.0 per cent.