European banks ruffled by SocGen warning
EXPOSURE: The announcement that Societe Generale will take a big writedown on CDOs and other liabilities came shortly before Obama was due to announce a bank tax
REUTERS AND AP , LONDON AND WASHINGTON
Thursday, Jan 14, 2010, Page 10
Shares in Europe’s banks fell 1 percent yesterday after France’s Societe Generale warned it will take a 1.4 billion euro (US$2 billion) hit from risky assets, and worries lingered about the threat that lawmakers will impose more taxes on the sector.
SocGen shares were down 4 percent by 0841 GMT, the worst performer in Europe’s DJ Stoxx European bank index. The DJ Stoxx bank index was down 0.7 percent at 229 points, after falling to 228.2, down for a third consecutive day.
SocGen’s warning served as a reminder of the scale of toxic assets still hobbling the international banking industry following the global financial crisis, although some analysts said the French bank was more exposed and it should not hit the rest of the sector too hard.
“We have consistently said that SocGen was the only bank left that still had a significant loss to take in structured credit,” said Arturo de Frias, analyst at Evolution Securities.
De Frias rated SocGen as a “sell” in a 2010 preview note issued on Dec. 7, citing the threat of more writedowns on toxic assets due to “significant legacy issues.”
“They seem to have decided to do this quarter after quarter rather than in one go,” he said yesterday, adding that other banks should not have to take further big writedowns.
SocGen’s writedowns were mainly on collateral debt obligations (CDOs) of residential mortgage-backed securities, changes in the mark-to-market valuation of credit default swaps (CDS) and the revaluation of financial liabilities.
The French bank also said its fourth-quarter net income in investment banking would be down from the third quarter, especially in fixed income. Analysts said a slowdown had been expected across the industry, which could see disappointment in results in the coming weeks.
A backlash against bank bonuses is also raising concern the sector will be hit by increased taxes or measures to rein in payouts, possibly hurting profits.
US BANK TAX
US President Barack Obama was scheduled to announce plans today to raise up to US$120 billion from major US financial firms to cover expected losses from a taxpayer-funded bank bailout, a senior administration official said, adding to a one-off levy on bonuses already announced in Britain and France.
The US$120 billion recovery goal is the most that administration officials expect to lose from the US government’s US$700 billion Troubled Asset Relief Program (TARP) that bailed out banks, automakers and other financial firms.
Most of the TARP losses are expected to come from auto industry rescues and the bailout of insurance conglomerate American International Group Inc.
Details of the fee are expected to be spelled out when Obama releases his 2011 budget next month. The US Congress would have to approve any fee plan.
The administration official said Obama’s plan has been in the works since August and would seek modifications to the law that sent billions of dollars in bailout money in 2008 and last year to a flailing Wall Street that was approaching collapse.
EXPOSURE: The announcement that Societe Generale will take a big writedown on CDOs and other liabilities came shortly before Obama was due to announce a bank tax
REUTERS AND AP , LONDON AND WASHINGTON
Thursday, Jan 14, 2010, Page 10
Shares in Europe’s banks fell 1 percent yesterday after France’s Societe Generale warned it will take a 1.4 billion euro (US$2 billion) hit from risky assets, and worries lingered about the threat that lawmakers will impose more taxes on the sector.
SocGen shares were down 4 percent by 0841 GMT, the worst performer in Europe’s DJ Stoxx European bank index. The DJ Stoxx bank index was down 0.7 percent at 229 points, after falling to 228.2, down for a third consecutive day.
SocGen’s warning served as a reminder of the scale of toxic assets still hobbling the international banking industry following the global financial crisis, although some analysts said the French bank was more exposed and it should not hit the rest of the sector too hard.
“We have consistently said that SocGen was the only bank left that still had a significant loss to take in structured credit,” said Arturo de Frias, analyst at Evolution Securities.
De Frias rated SocGen as a “sell” in a 2010 preview note issued on Dec. 7, citing the threat of more writedowns on toxic assets due to “significant legacy issues.”
“They seem to have decided to do this quarter after quarter rather than in one go,” he said yesterday, adding that other banks should not have to take further big writedowns.
SocGen’s writedowns were mainly on collateral debt obligations (CDOs) of residential mortgage-backed securities, changes in the mark-to-market valuation of credit default swaps (CDS) and the revaluation of financial liabilities.
The French bank also said its fourth-quarter net income in investment banking would be down from the third quarter, especially in fixed income. Analysts said a slowdown had been expected across the industry, which could see disappointment in results in the coming weeks.
A backlash against bank bonuses is also raising concern the sector will be hit by increased taxes or measures to rein in payouts, possibly hurting profits.
US BANK TAX
US President Barack Obama was scheduled to announce plans today to raise up to US$120 billion from major US financial firms to cover expected losses from a taxpayer-funded bank bailout, a senior administration official said, adding to a one-off levy on bonuses already announced in Britain and France.
The US$120 billion recovery goal is the most that administration officials expect to lose from the US government’s US$700 billion Troubled Asset Relief Program (TARP) that bailed out banks, automakers and other financial firms.
Most of the TARP losses are expected to come from auto industry rescues and the bailout of insurance conglomerate American International Group Inc.
Details of the fee are expected to be spelled out when Obama releases his 2011 budget next month. The US Congress would have to approve any fee plan.
The administration official said Obama’s plan has been in the works since August and would seek modifications to the law that sent billions of dollars in bailout money in 2008 and last year to a flailing Wall Street that was approaching collapse.