Societe Generale to Seek EU5.5 Billion After Fraud, Writedowns

By Gregory Viscusi

Jan. 24 (Bloomberg) -- Societe Generale SA said it will seek 5.5 billion euros ($8.1 billion) in new capital after discovering a case of trading fraud and taking further writedowns linked to the U.S. subprime mortgage market crash.

The bank discovered last weekend that a trader in Paris had secretly set up positions that will cost the company 4.9 billion euros before tax, Societe Generale said in an e-mailed statement today. The trader, who wasn't identified, went beyond permitted limits on futures linked to European stock indexes.

Societe Generale will also take 2.05 billion euros in writedowns related to credit market turbulence. The bank said it will still make a profit of between 600 million euros and 800 million euros for 2007. An offer by Chairman Daniel Bouton to resign was rejected by the board, the bank said.

Societe Generale yesterday fell 4.1 percent to 79.08 euros, its lowest since May 2005, valuing the bank at 36 billion euros. The shares have fallen 20 percent since the start of the year, hurt by expectations of further writedowns.

The company said it plans to raise the capital by selling shares in a rights offer underwritten by JPMorgan Chase & Co. and Morgan Stanley..