Banks forced to make Greek provisions

The fallout from the Greek debt crisis continued to take its toll on European banks yesterday, forcing France's Societe Generale to issue a profits warning and Italy's UniCredit to reveal it has made a large writedown.

As he announced a €395m (£344m) writedown on Societe Generale's Greek bond holdings, Frederic Oudea, chairman and chief executive of the bank, warned that the group's €6bn profit target for 2012 would be difficult to hit "within the scheduled time frame".

Societe Generale took the writedown after a deal last month in which investors in Greek government bonds agreed to a 21 per cent "haircut" on their holdings as part of a broader bailout deal orchestrated by leaders of the eurozone.

The Greek writedown helped push the bank's second quarter net profit down by 24 per cent to €449m.

UniCredit, Italy's biggest bank, reported that it took a €105m writedown on its portfolio of Greek bonds. However, the bank managed to increase its overall profits in the second quarter because it made lower provisions for bad debts elsewhere on its balance sheet.

BNP Paribas and Deutsche Bank have also announced writedowns since the Greek deal.