UPDATE 4-SocGen rules out Basel cap hike, shares rise

* To be above Basel minimum 6 yrs ahead of schedule – CEO

* Says confident it will meet long-term financial targets

* Shares rise over 4 pct, outperform sector

* Q3 net 896 million euros vs Reuters poll avg 793 million

* CEO says risk environment to improve in coming qrtrs

(Updates shares; adds CEO comments, detail)

By Lionel Laurent

PARIS, Nov 3 (BestGrowthStock) – French bank Societe Generale
(SOGN.PA: ) said it would not need a capital increase to meet
tougher industry rules and posted forecast-beating quarterly
profit, calming investor fears over its financial firepower.

Stung during the financial crisis by toxic asset losses and
the Jerome Kerviel trading scandal, SocGen is now ahead of its
2010 profit guidance and the business environment should stay
similar in the coming quarters, the bank’s chief said.

“(SocGen) is delivering the rebound it promised for
2010…We will be able to meet Basel III (capital requirements)
without a capital increase,” Chief Executive Frederic Oudea said
on a conference call on Wednesday.

The group’s shares rose over 4 percent. The market
turnaround since the crisis and a solid French economy have
boosted SocGen results this year, although lingering fears it
may need a cash call had led its shares to underperform.

Oudea, who took the reins of the bank at the tail-end of the
crisis in 2009, said he would steer SocGen to an estimated core
capital ratio of 7.5 percent by January 2013 — six years ahead
of Basel’s deadline for a new minimum of 7 percent.


For a graphic on SocGen results: http://r.reuters.com/fyd63q


SocGen said its core Tier 1 ratio would then rise to 8.5
percent by the end of 2013.

“The most important thing from our point of view is the
added (capital) disclosure,” MF Global analyst Shailesh
Raikundlia said. “They’ve given quite a detailed breakdown on
how it’s going to evolve over the next two to three years.”

Banks from Germany, Italy, Greece and Spain have tapped
investors for fresh equity in what is being dubbed a “solvency
race” as consolidation heats up and tighter capital requirements
loom. [ID:nLDE68T0ZR]

Switzerland and Britain are likely to impose requirements
above the Basel minimum on their banks but so far French
policymakers have struck a dovish tone, saying they need to
balance the needs of the wider economy. [ID:nLDE69E0VZ]

“Fears of a capital increase are clearly, finally, fading
away,” CM-CIC analyst Pierre Chedeville wrote in a note.


SocGen is confident it will meet its long-term financial
targets despite a “hesitant” economic recovery, Oudea said,
adding that the turnaround in the United States appeared more
uncertain than in France and Germany.

SocGen shares rose 4.2 percent to 43.88 euros by 1140 GMT,
outpacing an 0.8 percent firmer European banking sector (.SX7P: ).

The bank reported a year-on-year doubling of third-quarter
net profit to 896 million euros ($1.25 billion), higher than the
793 million average estimate in a Reuters poll of 14 analysts.
Revenue met forecasts at 6.3 billion. [ID:nLDE69R1IY]

SocGen benefited from a more benign risk environment than a
year ago, leading to lower loan-loss provisions, particularly in
French and international retail banking. Group provisions fell
by almost 40 percent, to 918 million, in the quarter.

The “cost of risk”, or burden of provisions, should decline
progressively in the coming quarters, Oudea told reporters.

The Russian market, one that is key to SocGen’s strategy
over the next few years, posted an improved performance in
retail banking for the third quarter.

Retail helped offset the impact of capital markets’
sluggishness on corporate and investment banking, where profit
fell 9.7 percent, weighed down by its capital markets unit.

A tough environment for investment banking in the quarter
hurt rivals Credit Suisse (CSGN.VX: ), Japan’s Nomura (8604.T: ) and
America’s Morgan Stanley (MS.N: ) (Read more about the money market today. ) and Goldman Sachs (GS.N: ).

Larger French rival BNP Paribas (BNPP.PA: ) is due to report
earnings on Thursday. The two banks have been at loggerheads for
a decade as BNP has swallowed several major acquisitions and
fuelled speculation SocGen cannot survive without a big merger.

But SocGen is confident it will stay independent and hit
long-term financial targets under Oudea. [ID:nLDE6740BD]


Commenting on the French public’s apparent sympathy for
ex-trader Kerviel, who was fined 4.9 billion euros and sentenced
to three years in jail for market bets that nearly sank SocGen,
Oudea said many reactions had been in “bad faith”.

The record fine outraged many politicians and the public,
undermining SocGen’s bid to make a fresh start and giving
Kerviel a springboard of support for an appeal. [ID:nLDE69B10Z]

“I was surprised, often shocked, by everything that I heard
(after the verdict),” Oudea told the conference call.

Oudea has worked hard to restore morale among employees that
took a hit when the Kerviel scandal broke in early 2008. On
Wednesday the bank announced a new share distribution plan for
161,000 employees across 80 countries.

SocGen shares are down around 14 percent year-to-date, worse
than a 6 percent drop for the STOXX Europe 600 bank index.
SocGen has a market value of around 31.8 billion euros.
($1=.7172 Euro)
(Editing by James Regan and Michael Shields)

UPDATE 4-SocGen rules out Basel cap hike, shares rise