Societe Generale – $30.1B

2008-08-05 Q2:

As Societe Generale reported a 63 percent plunge in profit, the financial press pretended to not notice how sick the bank really is. Simply being on life support doesn’t make the patient healthy. The bank wrote down another $1.8B this quarter, bringing its total to $15.5B.

Here’s the tally thus far:

1. Write-Downs/Charge-Offs: $13.7B + $1.8B = $15.5B
   
2. Cash Raised: $8.5B
   
3. Level III assets: $4.79B
   
4. Loan Loss Reserves: $1.31B

We now sum all the distresses to get Societe Generale’s current Pain Factor of $30.1B. <>

2008-06-04 Running on Empty:

Societe Generale is a little thin in their capital ratios according to the word on the Street. It looks like the $8.5B in the cash raised column is set to go up.

2008-05-14:

Societe Generale began fiscal 2008 with a sharp 23 percent drop in profit compared to the same period a year earlier. Compared to last years fourth quarter, though, the results are sterling.

It was in the fourth quarter that the bank blamed $7.6B (€4.9B) in losses from unauthorized trading on Jerome Kerviel, a 31 year old junior trader at the bank. For a junior trader to perpetrate that level of fraud would be like having your MasterCard with a credit limit of $100,000 maxed out by your six year old. Nonetheless, the story carried even after Kerviel claimed the bank knew of his activities and did not fire him immediately.

In addition to the suspicious trading losses, the bank’s fourth quarter 2007 write-downs included $3.2B (€2.05B) of subprime-related write-downs and provisions. At the time, financial markets were falling sharply, and while a $10.6B write-down may have been unseemly, $3.2B may have been relatively forgivable. All this occurred in January, but Societe Generale put the losses into last year’s fourth quarter when accounting for them, contributing to the $5.2B (€3.35B) loss for the quarter.

With the trading losses safely tucked away, the bank could report a modest $1.9B (€1.2B) of write downs for the first quarter while raising $8.5B in new capital.

March raised (5.5 billion euros) in a rights offer to replenish capital depleted by the trading scandal and asset markdowns

Mark-downs in the first quarter amounted to $2.2B (€1.45B).

First quarter 2008 write-downs plus mark-downs total $1.9B + $1.2B = $3.1B

2007-12-31:

Societe Generale held up fairly well in 2007 to the newly burst credit bubble. According to the bank’s full year report it took write-downs/loss totaling $3.7B (EUR 2.6B) of on US mortgage-related assets and write-downs of money market funds assets of $366.20 million (EUR 276 million)

In addition Societe Generale suffered a $6.5B (€4.9B) loss due to what the bank terms fraud, refering to the activies of Jerome Kerviel, a 31 year old junior trader at the bank. It is unlikely that a 31 year old junior trader cold rack up such damage without a lota necks broken looking the other way, so we will cout the fraud simply as a trading loss.

The bank reports the level of doubtful loans was $15.14B (€11.4B) for full year 2007 out of a total $432.79 (€326B), and provisions for $8.89B (€6.7B) loan loss.

Here’s the tally for Full Year 2007:

1. Write-Downs/Charge-Offs: $3.7B + $366.2M = $4.066B
   
2. Trade Loss: $6.5B
   
3. Loan Loss Reserves: $8.89B 

We now sum all the distresses to get Societe Generale’s current Pain Factor of $19.45B.