SG hit by €1.27 billion in writedowns

Société Générale's profits dropped 84% in the third quarter, as the bank's exposure to various aspects of the credit crisis caused it to announce writedowns of €1.27 billion.

In total, non-recurring items reduced the bank's pre-tax profits by €1.16 billion. Exposure to the collapse of Lehman Brothers in September provoked writedowns of €447 million. There was also a €453 million writedown caused by exposures to monoline insurers.

The bank booked losses and writedowns totalling €370 million on exotic credit derivatives. But it reported that the mark-to-market value of its credit default swap holdings had risen to €262 million, up from negative €501 million in the second quarter of 2008.

SG said it was well-positioned to withstand deteriorating conditions in the financial markets, citing its Tier 1 capital ratio of 9%.

In October, SG agreed to receive €1.7 billion from the French state in exchange for subordinated debt. The move was part of a €10.5 billion government scheme to encourage lending to households and businesses while maintaining high solvency levels in banks.