Ukraine Scapegoated As Fixed Income Revenue At SocGen Plunges Over 25%

Tyler Durden's picture


When Obama repeatedly chanted "costs" should the Kremlin continue to ignore him, it appears he was referring to western corporations, because overnight we got the first batch of companies scapegoating no longer snow in the winter but - what else - the Ukraine.

Leading this morning's scapegoat parade is SocGen, which following in Barclays' footsteps reported a 13% tumble in its Q1 profit, plunging to €315 million from €364 million. The reason for this huge hit to profits apparently was a €525 million ($731.26 million) write-down at its Russian bank - the same bank which, as recently as April 11, saw SocGen "increase its stake in Russian subsidiary Rosbank which it said was part of a long-term commitment to Russia. The deal comes as Russia's economy is under pressure partly as a result of sanctions imposed by the United States and Europe to protest against Moscow's annexation of Crimea."

So SocGen was dumping money into a Russian subsidiary well after the Ukraine conflict  had begun, knowing quite well it would be "forced" to take a Rosbank charge mere weeks later! Why yes, of course.

WSJ reports:

While Russia today accounts for only about 5% of the group's total revenue, Société Générale once had big ambitions in the country. It hoped its local lender Rosbank would help drive growth over the next few years as Europe struggled to pull itself out of the financial crisis.


Société Générale bought a 20% stake in Rosbank for $634 million in 2006. Since then it has spent over €4 billion building a 99.4% stake, integrating its back-office and technology platforms, shaking up management and cutting more than 2,500 jobs.


But the French bank's efforts have been slow to pay off. It suffered a setback last year when Rosbank Chief Executive Vladimir Golubkov stepped down after he was charged with bribery by Russian authorities.

We wonder if SocGen will also blame the absolute collapse in its fixed-income revenue - that key variable for New Normal bank profitability - also on Russia. Because once the ability to addback massive charges on unrelated Russian assets ends, SocGen may finds itself in trouble. From Reuters:

SocGen's corporate and investment bank, which is traditionally weighted more towards equities trading than fixed income, was not immune to the fixed-income slump that has hit rivals such as British bank Barclays.


SocGen said fixed-income revenue fell 25.3 percent in the first quarter, while equities revenue rose 9.3 percent. Overall, its investment banking and asset management division saw earnings drop 15.2 percent to 481 million euros.

But how was the loss not bigger? Simple: SocGen did what ever other self-respecting and insolvent US bank does every quarter - balance sheet gimmickry. "French retail banking fared better thanks in part to a 28 percent drop in loan-loss provisions. SocGen's international retail bank, however, swung to a loss on the Russian charge." That's ok, that Russian charge was also added back, allowing investor to ignore the elephant in the room: namely that aside from vacuum tubes and central banks, virtually nobody is trading any more.

As for the rest, blame it on Ukraine.

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Wed, 05/07/2014 - 08:05 | 4735322 GetZeeGold
GetZeeGold's picture



I live in distressed flyover country.....who do we contact at the IMF so we can buy some gold?


I understand there may be a conflict of interest cause we sent the IMF the money in the first's just that we would like it back now. If they would just like to send gold....that would be totally cool.

Wed, 05/07/2014 - 08:11 | 4735339 Sudden Debt
Sudden Debt's picture

eeuuhh... yeah... bout that...

I think the basement is still flooded from last year and that little paper that said how much you deposited writting in ink on rise paper will probably be gone to...

Wed, 05/07/2014 - 08:15 | 4735347 Ghordius
Ghordius's picture

you need an army. as soon as you have one, the IMF will contact you (the depressing part of this is that it's not that far from the truth)

Wed, 05/07/2014 - 08:03 | 4735323 james.connolly
james.connolly's picture

Trade with your heart, or trade with your dick, its up to you.

Those who 'trade' with their heart will sleep, and those who trade with their dicks' will die a miserable fucking death.


Wed, 05/07/2014 - 08:07 | 4735330 Sudden Debt
Sudden Debt's picture

Oké, you got my attention.

How does playing with your dick gets you to die a misrable fucking death?


Wed, 05/07/2014 - 09:27 | 4735343 SoilMyselfRotten
SoilMyselfRotten's picture

Next it will be the Siberian Vortex in Ukraine that's to blame

Wed, 05/07/2014 - 08:04 | 4735324 Sudden Debt
Sudden Debt's picture

which following in Barclays' footsteps reported a 13% tumble in its Q1 profit


well... nice to see that the Ukraine is actually a economical central hub...

who would have known...

Wed, 05/07/2014 - 08:05 | 4735326 Debugas
Debugas's picture

now i understand it - the war is needed to declare force-majeur and walk away from trillions obligations

Wed, 05/07/2014 - 08:08 | 4735327 medium giraffe
medium giraffe's picture

It's not an earnings drop, it's a moron tax.

Wed, 05/07/2014 - 08:11 | 4735331 Eyeroller
Eyeroller's picture

Sure looks like the excuse will shift from winter to Ukraine.  But if Ukraine is the new boogeyman responsible for all the bad news, then does the market continue to ignore it.  Volatility very low compared to the VIX on March 3rd.


Wed, 05/07/2014 - 08:09 | 4735335 buzzsaw99
buzzsaw99's picture

they should just ipo something

Wed, 05/07/2014 - 08:12 | 4735344 BandGap
BandGap's picture

There will always be something to blame, whether you play with your dick or not. TPTB don't want people to think things through, and most people are happy with what appears to be the "obvious" answer. They will pay for not paying attention. Or playing with their dicks.

Wed, 05/07/2014 - 08:17 | 4735348 aleph0
aleph0's picture



Only SocGen ?


I'd have thought many more would have loved to NOT miss this opportunity.
After all , the weather is warm at the moment.


Oh well .. maybe a few will join in later in the day.

Wed, 05/07/2014 - 08:20 | 4735353 BandGap
BandGap's picture

Agreed, the herd mentality in chasing those ill-begotten "opportunities". Just like lemmings off a cliff, they don't see much beyond the ass in front of them.

Wed, 05/07/2014 - 08:20 | 4735352 Ban KKiller
Ban KKiller's picture

Is there any bank that does not cook their books? Yeah, stupid question.

Send them nail guns into Russia. 

Wed, 05/07/2014 - 08:23 | 4735364 BadDog
BadDog's picture

Gold is getting its regular eight o'clock beating.  If you got the shit beaten out of you every day at the same time on your way to work, you'd probably find another route.

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