SocGen takes $731 million writedown on Russian arm

Wed May 7, 2014 7:22am EDT
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By Lionel Laurent and Matthias Blamont

PARIS (Reuters) - Societe Generale (SOGN.PA: Quote), France's second-largest listed bank, has written down the acquisition value of Russian arm Rosbank by 525 million euros ($731 million), blaming the economic uncertainty caused by Russia's soured relations with Ukraine.

The writedown adds to the list of European companies to take a hit from the unrest in Ukraine between government forces and pro-Russian separatists, which has led the United States and Europe to impose sanctions against some Russian individuals and entities and to a slide in the value of the Russian rouble.

Danish brewer Carlsberg (CARLb.CO: Quote) on Wednesday blamed the weak rouble and declining eastern European sales for missing first-quarter earnings forecasts.

The writedown to goodwill - effectively the premium paid for an acquisition - marks a blow to SocGen's ambitions in Russia, where it has poured billions into restructuring Rosbank in the face of competition from local state-owned rivals and the 2013 arrest of its top Russian executive on bribery charges.

SocGen said it expected to achieve a "satisfactory" double-digit percentage return-on-equity in Russia in 2016, effectively scrapping a previous target of over 15 percent in 2015, and said it would give an update on its three-year outlook for Russia on May 13.

Russia accounts for 3 percent of SocGen's loan exposure, or approximately 19.5 billion euros at end-December, the bank said.

"There are significant risks for SocGen in Russia," said Francois Chaulet, fund manager at Paris-based Montsegur Finance.

"But the writedown does look more like an accounting gesture ... None of this is insurmountable for SocGen."   Continued...

Members of a French scientific police inspect the scene after a man opened fire outside the French bank Societe Generale building in the financial district of La Defense near Paris November 18, 2013. REUTERS/Jacky Naegelen