Page 7

LA_LETTRE_DE_LACTIONNAIRE_N91_UK

ANNUAL GENERAL MEETING, 20 MAY 2014 Dialogue with shareholders LETTER TO SHAREHOLDERS_2014 | 7 Could the falling-out between Ukraine and Russia affect Rosbank’s business and cost of risk? The Russian economy has been slowing since the second half of 2013 and this will probably be exacerbated by geopolitical tensions. 2014 will probably not, then, be as good as we were initially hoping. At Rosbank, cost of risk was on the rise even before the political crisis broke out in Ukraine. Our core scenario sees a sharper slowdown in Russia, leading to higher cost of risk, but Rosbank’s books should remain in the black. The latest developments in the crisis seem to confirm our scenario and we do not think Rosbank is going to be a major drag on Societe Generale’s cost of risk overall. Russia, in any case, only represents 3% of the Group’s risk exposures. Why did Societe Generale not launch a paper bid for the non-controlling shares in its subsdiary Boursorama? We already controlled Boursorama, our online banking and brokerage subsidiary, before the bid. We held 55.6% of the capital and our Spanish partner, Caixa, owned another 20%. In cooperation with Caixa, which will retain its stake in Boursorama after the transaction, we launched a simplified public takeover bid. Societe Generale clearly had no need to raise fresh capital in order to fund such a relatively small acquisition (around €220 million). It was easier, in a transaction of this type, to pay in cash. Some local authorities have taken out “toxic” bank loans whose complexities could lead to them paying very high rates. Cases are already before the courts. Is Societe Generale exposed to this? At the end of the last decade, the Group had 15-20% of the market for local authority finance. But we always followed an extremely strict policy on the “structured” loans to local authorities. Our market share is therefore very small and Societe Generale was not one of the entities that the Finance Minister called in regarding this affair. The French court of appeal (Cour de Cassation) confirmed in March Jérôme Kerviel’s criminal conviction but not his civil conviction. Could this cast into doubt the tax-deductibility of the losses that the bank enjoyed as a result of this affair? This is a loss recorded in the company’s accounts and would normally be deducted from the accounts. What you are really WE ALWAYS FOLLOWED AN EXTREMELY STRICT POLICY ON THE “STRUCTURED” LOANS TO LOCAL AUTHORITIES


LA_LETTRE_DE_LACTIONNAIRE_N91_UK
To see the actual publication please follow the link above