SocGen profits decline

August 2, 2001 Posted: 0654 GMT

LONDON (CNN) -- Societe Generale, France's No. 3 bank, posted a 15 percent fall in second-quarter net profit as investment banking income dropped.

The bank reported on Thursday net income for the three months to June 30 of 641 million ($565 million), or 1.6 per share, compared with 752 million, or 1.89 a share, in the same period a year ago.

SocGen's investment banking and corporate business units posted a 36 percent drop in profits to 135 million compared with 210 million in the same quarter of 2000. Net income from equity and advisory activities plunged 86 percent to 28 million from 205 million in the year-ago period.

"Revenues generated by the equity and advisory activities were weak and weighed on overall profitability," said Chairman Daniel Bouton. "Cost-cutting activities have been launched in these areas to reduce overheads,"  he added, without giving details.

The world's leading banks have seen their investment banking and brokerage businesses suffer as equity markets have stalled, mergers have been put on hold and initial public offerings cancelled.

Merrill Lynch (MER: Research, Estimates), the world's leading brokerage  reported a 40 percent drop in second-quarter profits on July 17 and said the third quarter would miss targets as the U.S. economic slowdown bites into earnings.

Deutsche Bank, Europe's biggest bank, said on Wednesday that first-half net profits dropped 35 percent as business suffered in the slowdown.

SocGen operates a global investment banking business with units in the UK such as SG Hambros and in the U.S., where it has 3,000 employees,  under the SG Cowen and SG Barr Devlin banners.

The bank said last month that poor markets in the U.S. and Europe had hit transaction volumes in the second quarter.

Figures on Thursday also showed that return on equity, a key measure of banking profitability, declined to 18.4 percent in the quarter from 24.1 percent in the same period a year ago.

SocGen's retail banking division, which normally provides about half its profits, held up well as it logged a 5 percent rise in second-quarter net income to 297 million from 282 million in the same period last year.

The bank has a branch network in France of 2,600, operating under the SocGen and Credit du Nord brands.

The asset management and private banking division also limited the damage in the slowdown, with profits falling just 3 percent to 65 million from a previous 67 million.

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