Societe Generale said on Friday that resolving two out of three key legal disputes with U.S. authorities was a matter of the coming weeks and months, as it tacked on 300 million euros ($350 million) to its litigation reserves.
The French bank is seeking to reassure the market before its medium-term strategy presentation on Nov. 28, as investors fret that pending legal disputes, for which the bank has set aside 2.2 billion euros, could hurt its dividends distribution.
SocGen also reported a 15 percent fall in third-quarter net income to 932 million euros, below analysts` estimates of 1.00 billion euros according to a Reuters poll, as it gave an update on litigation issues related to the Libya Investment Authority (LIA) and the Interbank Offered Rate (IBOR).
"Societe Generale is currently in discussions with the U.S. authorities over two litigations, LIA and IBOR, in order to reach an agreement to resolve these matters, and has decided, as a precautionary measure, to increase the provision for disputes," SocGen said in a statement.
SocGen has been in talks with U.S. authorities, including the U.S. Department of Justice, in connection with investigations regarding submissions to the British Bankers Association for setting certain London Interbank Offered Rate (Libor) and submissions to the European Banking Federation for setting the Euro Interbank Offered Rate (Euribor).
It is also awaiting a potential follow-up in the U.S. on the dispute with the Libyan Investment Authority (LIA) which was settled at a London court for 1 billion euros in May.
In May, SocGen - France`s second-biggest listed bank behind BNP Paribas - reached an 11th-hour settlement over LIA allegations that trades were secured as part of a "fraudulent and corrupt scheme" involving the payment of $58.5 million by SocGen to a Panamanian-registered company.
But those two disputes may not mark the end of SocGen’s legal woes, with the bank still in talks with U.S. authorities over dollar transfers it made on behalf of entities based in countries subject to economic sanctions.
The uncertainty over litigation comes with its profits squeezed by revenue pressure in French retail banking, due to a low interest rate environment and investments in digital technologies this year, as well as a slump in trading.
SocGen confirmed its guidance for a 3 to 3.5 percent fall in French retail banking revenue, which has been weighed down by mortgage renegotiations and prepayments.
Revenue at its investment banking arm slumped 15 percent, mirroring results at other banks, with BNP Paribas this week also reporting a drop in fixed income trading.
"The first signs of a slowdown observed in Q2 intensified, with sluggish trading activity in August and a late rebound at the end of the quarter," said SocGen.
($1 = 0.8576 euros)
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