French bank Societe Generale SA, recovering from a multibillion dollar trading scandal, said Tuesday that net profit fell 63 percent in the second quarter after the ongoing crisis in world financial markets led to a loss in its investment banking unit. Net profit dropped to 644 million euros ($$1 billion) in the second quarter from 1.74 billion euros a year ago, SocGen said in a statement. The corporate and investment banking unit posted a 186 million euros ($290 million) loss, compared with a 721 million euros profit a year earlier, the bank said. France's second-largest bank said write-downs and one-time charges subtracted 917 million euros ($1.4 billion) from earnings in the quarter. On Tuesday the bank said its retail banking and financial services units, which together account for around two-thirds of revenue, both posted a profit. French retail banking profit fell 11 percent to 328 million euros ($510 million) amid a “not particularly favorable” environment, the bank said. International retail banking posted a 42 percent rise in earnings to 238 million euros ($370 million) led by operations in the Czech Republic, Russia and Romania. Financial services posted a 13 percent increase in profit to 167 million euros ($260 million). CEO Frederic Oudea, promoted from CFO in May, said the second quarter result “reflects the robustness” of the bank's portfolio of activities, despite what he called “a crisis on an exceptional scale” in global markets. Shares rose 8 percent to 64.13 euros ($99.32) in Paris afternoon trading. Christoph Bossmann, an analyst at Germany's WestLB Research, said the results are better expected after the revenues at the corporate investment bank exceeded predictions, showing that the “concerns of some market participants were overdone.” Besides the global financial crisis, SocGen announced in January it had taken a 4.9 billion euros ($7 billion) hit while closing what it calls unauthorized positions by former trader Jerome Kerviel. Though announced in the first quarter, the loss was included in the bank's 2007 results. Oudea said seven people were either fired or left the bank as a result of the trading scandal, some of whom have since been recruited by other banks. SocGen has “learned its lesson with humility,” he said, tightening security and controls. Oudea called the scandal an “accident” and said his imperative now is to manage the credit crisis. “The impact of the affair Kerviel is mostly behind us,” he said at a news conference in Paris. “The important thing now is to move forward.” Bossmann said the Kerviel affair does not seem to have scared clients away. SocGen is the latest bank to report lower profits as a result of the contagion from risky US mortgages that has hit financial markets. HSBC Holdings PLC, Europe's largest bank by market value, reported Monday its steepest fall in profit since 2001, as costs for bad US mortgage loans mounted.
