SocGen misses profit forecast as bid talk returns

By Sudip Kar-Gupta and Julien Ponthus

PARIS (Reuters) - Societe Generale's (SOGN.PA: Quote, Profile, Research) lower-than-expected third quarter profit has highlighted the French bank's weakness compared to many of its rivals and its position as a possible bid target if there is a sector shake-up.

Like peers Credit Suisse (CSGN.VX: Quote, Profile, Research) and Deutsche Bank (DBKGn.DE: Quote, Profile, Research), SocGen's investment banking results powered the profit line although debt provisions rose to cover an expected further rise in bad loans in 2010.

Net profit rose to 426 million euros ($623 million) euros from 183 million a year earlier, mainly due to the fact that SocGen's investment banking arm swung to a profit from a year-earlier loss.

However, the bank missed the average estimate of 481 million euros in a Reuters poll of 10 analysts as group revenues were weaker-than-expected and provisions were higher. The banking group's revenues took a hit at its international arm, affected by the Russian economic slowdown and its investment management arm, due to outflows.

France's second-biggest and the euro zone's No.6 bank by market value has been steadily recovering since a 4.9 billion euro trading loss in January 2008, which it blamed on unauthorized deals carried out by Jerome Kerviel, a former junior trader at the bank.

However, SocGen remains the subject of persistent bid speculation in France. Last week, Credit Agricole (CAGR.PA: Quote, Profile, Research) -- the country's biggest bank by branches -- denied a report in Le Monde that it was considering a merger with SocGen and insurer Groupama.

La Tribune newspaper said on Wednesday that BNP Paribas (BNPP.PA: Quote, Profile, Research) was looking at SocGen.

BNP Paribas, France's biggest bank by market capitalization, denied the Tribune article. BNP reiterated that its immediate focus was on integrating its recent buy of Fortis assets.