When Obama repeatedly chanted “costs” should the Kremlin continue to ignore him, it appears he was referring to western corporations, because overnight we got the first batch of companies scapegoating no longer snow in the winter but – what else – the Ukraine.
Leading this morning’s scapegoat parade is SocGen, which following in Barclays’ footsteps reported a 13% tumble in its Q1 profit, plunging to €315 million from €364 million. The reason for this huge hit to profits apparently was a €525 million ($731.26 million) write-down at its Russian bank – the same bank which, as recently as April 11, saw SocGen “increase its stake in Russian subsidiary Rosbank which it said was part of a long-term commitment to Russia. The deal comes as Russia’s economy is under pressure partly as a result of sanctions imposed by the United States and Europe to protest against Moscow’s annexation of Crimea.”
So SocGen was dumping money into a Russian subsidiary well after the Ukraine conflict had begun, knowing quite well it would be “forced” to take a Rosbank charge mere weeks later! Why yes, of course.
While Russia today accounts for only about 5% of the group’s total revenue, Société Générale once had big ambitions in the country. It hoped its local lender Rosbank would help drive growth over the next few years as Europe struggled to pull itself out of the financial crisis.
Société Générale bought a 20% stake in Rosbank for $634 million in 2006. Since then it has spent over €4 billion building a 99.4% stake, integrating its back-office and technology platforms, shaking up management and cutting more than 2,500 jobs.
But the French bank’s efforts have been slow to pay off. It suffered a setback last year when Rosbank Chief Executive Vladimir Golubkov stepped down after he was charged with bribery by Russian authorities.
