The beleaguered French bank Société Générale slumped to record losses in the fourth quarter, as it suffered the worst rogue trading scandal in history and the ongoing effect of the credit crunch.
The results announcement came as an internal investigation revealed that management had failed to pick up on the alleged rogue trader behind the €4.9bn (£3.7bn) losses despite his being red-flagged 75 times in less than two years.
SocGen slashed its divi-dend yesterday as it reported €3.35bn losses for the final three months of the year. The bank had reported a profit of €1.18bn in the final quarter of 2006.
The bank blamed the unauthorised positions taken by Jérôme Kerviel, which were compounded by the ongoing impact of the credit crisis sparked by the US sub-prime mortgage meltdown. While the trades were discovered in mid-January, the losses were booked in the fourth quarter.
The bank managed to post a full-year profit of €947m, although that was down 82 per cent on the previous year. The crisis also forced it to slash its dividend from €5.20 to 90 cents.
SocGen said that against the backdrop of the financial crisis, it had produced resilient revenues last year, with good performances in its retail banking network, financial services, private banking and securities services businesses. The corporate and investment banking divisions and the asset management divisions suffered most.
This came after the "Special Committee" of independent directors set up by SocGen to investigate the trading losses reported its preliminary findings. It said the failure to identify the fraud was down to M. Kerviel's efficiency, the lack of detailed checks from operating staff and absence of controls that would have identified the fraud. It added that it was not sure all of M. Kerviel's trading positions had been uncovered.
The committee added that the bank had failed to act despite 75 warnings between June 2006 and last month. It found that M. Kerviel had begun making the unauthorised trades as far back as 2005. M. Kerviel had admitted as much to the French prosecutors, but SocGen had previously admitted to being unaware of the positions stretching back that far.
Elsewhere UBS, one of the biggest victims of the sub-prime crisis in Europe, announced it was backing Marcel Ospel for re-election as chairman despite the huge losses.
But the Swiss banking giant has proposed shortening the chairman's terms to one year.Reuse content