Newspaper article International New York Times

Russia Turmoil Hits Societe Generale ; Weak Ruble and Crisis in Ukraine Pull Down Profit of Big French Bank

Newspaper article International New York Times

Russia Turmoil Hits Societe Generale ; Weak Ruble and Crisis in Ukraine Pull Down Profit of Big French Bank

Article excerpt

The fall of the ruble and "growing uncertainty" led the bank to write down the goodwill of its Russian business. The bank's net income fell 13%.

Societe Generale, the second-largest French bank, said on Wednesday that its first-quarter profit fell from a year earlier, as it wrote down the value of its Russian assets amid the international crisis over Ukraine.

The decline of the ruble and tensions over the political upheaval in Ukraine weighed on the performance of other companies as well, including the Danish brewer Carlsberg, which said on Wednesday that its first-quarter results drooped in part because of lackluster beer sales in Russia, where it is the market leader. Beer companies have been trying to widen their margins in Russia and other emerging markets as sales expand more slowly in North America and Western Europe.

On Tuesday, the Organization for Economic Cooperation and Development cut its forecast for Russian growth this year to 0.5 percent from an earlier forecast of 2.3 percent, saying the events in Ukraine had stunted efforts at economic recovery. And last week, the International Monetary Fund cut its 2014 growth forecast for Russia to 0.2 percent, saying the country was already in recession, citing the hit to investor confidence because of Ukraine. The fund noted that the prospect that sanctions would eventually be imposed by the West was weighing on the outlook.

Among banks, the French have significant exposure to Russia, led by Societe Generale, which said its first-quarter net income fell 13 percent from a year earlier to 315 million euros, or $439 million, even as revenue rose 3.3 percent to EUR 5.8 billion.

Shares of Societe Generale closed down 0.8 percent in Paris on Wednesday. Carlsberg shares rose by 1 percent.

Societe Generale owns Rosbank, a major lender in Moscow, as well as two smaller Russian financial institutions, Delta Credit Bank and Rusfinance Bank. The fall of the ruble and the "growing uncertainty concerning the environment and delayed performances" led Societe Generale to completely write down the goodwill of its Russian business, reducing net income by EUR 525 million, it said.

Good will is an intangible asset carried on a company's accounts that reflects an estimate of an acquired company's market value over its book value. …

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