Archive for November, 2008

SocGen net slumps, but can get through crisis (Reuters)

Monday, November 3rd, 2008 | Finance News

* SocGen says strong enough to withstand market turmoil

* Books slump-related writedowns of 1.2 bln euros

* French PM not ruling out taking stakes in French banks

By Sudip Kar-Gupta

PARIS (Reuters) - French bank Societe Generale (SOGN.PA) reported an 83.7 percent fall in third-quarter net profit on Monday but said it was strong enough to weather the global financial crisis.

Net profit fell to 183 million euros ($233.8 million), with earnings hit by a 244 million-euro loss at its corporate and investment banking division.

SocGen said non-recurring items from the collapse of Wall Street bank Lehman Brothers (LEHMQ.PK) and other writedowns related to the market slump had a negative pre-tax impact of 1.208 billion euros.

Excluding this, it said net profit would have been around 1 billion euros, in line with guidance given by the bank last month.

SocGen's gross operating profit fell 29.5 percent to 1.411 billion euros, while its pro forma Tier 1 ratio -- factoring in French state support for the banking sector -- stood at 9 percent.

"This sound solvency, coupled with the quality of its various customer franchises, will help SocGen to successfully pursue its strategy as well as weather a potential deterioration in the economic environment in 2009," it said in a statement.

West LB analyst Christoph Bossmann, who kept a "hold" rating on SocGen shares, said the operating performance was "OK while the Tier 1 ratio is a positive."

SocGen is the first French bank to post third-quarter results. BNP Paribas (BNPP.PA), France's biggest listed bank, publishes on November 5. Credit Agricole (CAGR.PA), France's biggest retail bank, posts results on November 13.

The credit crisis has crippled the world's top banks and led to government intervention around the world, including in France.

Earlier this month, U.S. bank Wachovia Corp (WB.N) posted a record third-quarter loss of $23.9 billion. Spain's Santander (SAN.MC), the euro zone's biggest bank by market capitalization, reported higher third-quarter profit but also rising bad loans.


On Monday, Germany's Commerzbank (CBKG.DE) posted a third-quarter loss and confirmed it would use a German government bailout fund.

In France, President Nicolas Sarkozy has earmarked 360 billion euros for the country's finance sector as part of an international effort to help banks survive the worst financial crisis since the Great Depression almost 80 years ago.

France has also agreed to lend 10.5 billion euros to the country's top banks to encourage them to lend to businesses.

French Prime Minister Francois Fillon was quoted by Le Figaro newspaper on Monday as saying that if the banks did not use the money to lend to businesses, then the government could take direct stakes in the banks.

SocGen Chief Executive Frederic Oudea said in a radio interview on Monday the bank was continuing to lend, adding that it was not losing customers.

France has agreed to subscribe to subordinated debt issued by Credit Agricole (CAGR.PA) for 3 billion euros, BNP Paribas (BNPP.PA) for 2.55 billion, SocGen (SOGN.PA) for 1.7 billion euros, and for 1.2 billion by Credit Mutuel.

It will also lend 1.1 billion to Caisse d'Epargne and 950 million to Caisse d'Epargne's merger partner, Banque Populaire.

SocGen shares closed up 6.5 percent at 42.18 euros on Friday, giving it a market capitalization of around 25 billion euros. Its shares have fallen around 55 percent since the start of the year, broadly in line with a 53 percent fall in the DJ Stoxx European bank index (.SX7P).

In January, SocGen fell victim to the world's worst rogue trading scandal when it unveiled 4.9 billion euros of losses, which it said were caused by unauthorised trades conducted by Jerome Kerviel, a 31-year old junior trader at the bank.

(Reporting by Sudip Kar-Gupta; Editing by James Regan and John Stonestreet)


PE exec to help UAW on potential GM/Chrysler deal: source (Reuters)

Monday, November 3rd, 2008 | Finance News

NEW YORK (Reuters) –
Stephen Girsky, a veteran auto-industry analyst and private equity executive, is working with the United Auto Workers union with regards to any potential General Motors Corp (GM.N) and Chrysler LLC deal, a source familiar with the situation said on Sunday.

Girsky is president of Centerbridge Industrial Partners, LLC., the industrial unit of private equity firm Centerbridge Partners.

The Wall Street Journal reported earlier on Sunday that the union recently retained Girsky to help "level the playing field" in any discussions about changes in its current contract that could be needed in a tie-up of the two auto makers.

Girsky is expected to help UAW President Ron Gettelfinger evaluate the deal and shape the union's strategy, the WSJ said, citing sources.

Sources told Reuters last week that a deal to merge General Motors and Chrysler LLC hit an impasse after the Bush administration ruled out funding for it.

Advisers on Cerberus' side are JP Morgan (JPM.N) and Citi (C.N) and on the GM side are Morgan Stanley (MS.N) and Evercore (EVR.N), a person familiar with the talks previously told Reuters.

Centerbridge and the UAW were not immediately available for comment.

(Additional reporting by Jui Chakravorty-Das and Kevin Krolicki; Editing by Lincoln Feast)


PepsiCo to invest $1 billion in China (Reuters)

Monday, November 3rd, 2008 | Finance News

BEIJING (Reuters) –
PepsiCo Inc (PEP.N), a U.S.-based food and beverage company, said on Monday it plans to invest $1 billion in China over the next four years, as part of the company's strategy to expand in emerging markets.

PepsiCo's investment in China will fund a variety of major capital programs to expand manufacturing capacity, particularly in interior and western areas, said PepsiCo's chairman and chief executive officer, Indra Nooyi, who is in China this week.

"This is our largest investment in China in the nearly 30 years we have been doing business here, and it is consistent with our broader global strategy of investing in high-growth developing markets," Nooyi said in a statement.

Beverage sales in the U.S., especially sales of bottled water, have been hit hard as a housing slump, credit crunch, job losses and high gas prices have forced cash-strapped consumers make fewer trips to gas stations and convenience stores, eat out less often and drink tap water to save money.

PepsiCo cut its full-year outlook last month as an economic slowdown sapped soft drink demand.

The investments are expected to create thousands of new jobs in China, where PepsiCo and its bottling partners already directly employ more than 22,000 people, it said in the statement.

The announcement was made during a four-day visit by Nooyi, who has been holding meetings with government officials and local business executives and visiting the company's local operations.

The money will also be used to expand local research and development facilities and build the company's sales force to boost product distribution, the company said in the statement.

The statement did not say whether PepsiCo is expanding manufacturing capacity by building up more plants.

Repeated phone calls to the company went unanswered.

(Reporting by Michael Wei; Editing by )