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Societe Generale: $2B writedown to hit Q4 profit

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PARIS (AP) — Societe Generale SA said Wednesday it would record about euro1.4 billion ($2 billion) in fresh asset writedowns in the fourth quarter of 2009, leaving the French bank barely in the black for the period.

In a statement, France’s second-largest listed bank blamed “the contrasted signals coming from the U.S. residential real estate market.”

It said that despite the writedowns, it expects to report a “slight” profit in the fourth quarter when it posts its earnings next month.

Societe Generale shares fell as much as 6 percent in early trading in Paris as investors were spooked by the profit warning. At 09:30 GMT the shares were down 4.7 percent at euro49.30.

The Paris-based bank had already recorded euro1.9 billion of so-called “nonrecurring items” in the first quarter and euro1.7 billion in the second. Those charges included writedowns on the value of credit default swaps that it uses to hedge loans, as well as provisions for loan losses.

Societe Generale had looked to be on the rebound after a difficult start to the year. Its net profit more than doubled in the third quarter after improved financial market conditions helped earnings at its investment banking unit.

The bank also warned that income from corporate and investment banking would fall in the fourth quarter compared to the third. It blamed lower investor activity in November and “less favorable market conditions.”

Despite this, the bank said it is “in a favorable position to go into 2010 with confidence,” citing a “robust financial structure” and new management.

In October, SocGen completed a euro4.8 billion capital increase to pay back a total of euro3.4 billion in government bailout funds. The rest of the money will strengthen SocGen’s capital position and fund the acquisition of French retail bank Credit du Nord from Franco-Belgan lender Dexia SA.

Societe Generale has been slowly recovering from a trading scandal — in January 2008 it announced that it lost nearly euro5 billion (more than $7 billion) unwinding what it said were unauthorized positions held be a single trader, Jerome Kerviel.

The affair rattled an already uneasy banking sector and prompted widespread calls for tighter internal controls at banks.