Société Générale is to repay state crisis aid together with a hefty return, it said yesterday, becoming the third French finance house to break free from state support.
Amid improving prospects for the economy, the bank said it intended to raise €4.8 billion to help make the repayment, and would offer existing shareholders a 30 per cent discount.
The French government had provided Société Générale with a total of €3.4 billion, part of nearly €20 billion lent to French banks with interest to prevent lending from drying up after the September 2008 meltdown.
It now looked set for a healthy return on the payments and investments it made in Société Générale over the past year.
The group’s financial director Didier Valet told reporters it would pay the state €125 million worth of interest for the €1.7 billion worth of shares it took in the group, and a further 60 million in share dividends.
Its chairman Frederic Oudea was quoted as saying the 2010 economic outlook boded well for lenders.
“The banking sector will be able to heal its wounds and reinforce its strength,” Mr Oudea, who took over as chairman in May, said in comments published by Le Monde. “The situation on the markets will continue to normalise,” he added. “Capital increases are going to multiply over the coming months.”
Société Générale also said it was entering into negotiations with Franco-Belgian bank Dexia with the aim of purchasing Dexia’s 20 per cent stake in Credit du Nord.
Société Générale said it intended to complete the transaction before the end of the year. No figures for the purchase were provided.
The purchase would allow Société Générale to strengthen its position in the retail banking market, particularly in France.
Société Générale becomes the third French bank after BNP Paribas and Credit Mutuel to repay state aid ahead of schedule. It plans to pay back the funds in early November.
From tomorrow, the bank is offering new shares at a price of €36, which is 30 per cent less than the share price on Monday.
The subscription rights end on October 20.
Last week, Credit Mutuel handed back the full €1.2 billion it owed the state while BNP Paribas launched a plan to raise €4.3 billion in capital after receiving €5.1 billion from the state. Société Générale was nearly made insolvent at the beginning of last year by huge exposure on alleged rogue trading positions associated with trader Jerome Kerviel.
This forced it to raise capital and strengthen its balance sheet about six months before the worst of the financial crisis, sparked by the collapse of Lehman Brothers, forced other banks to raise capital in distressed market conditions.
Many banks in various countries then required emergency support from their governments as lenders of last resort.
Société Générale posted losses of €278 million in the first quarter of this year but then bounced back with a €309-million net profit in the second quarter.