Sub-Prime Crisis Continue to Haunt Banks

The fears of impugning sub-prime crisis will continue to haunt the banks, rendering them jittery as Société Générale surprised investors with a fourth-quarter profit warning.

Amidst the speculations that American property market is on the path to recover, France's second-biggest bank claimed that risk-laden assets would wipe €1.4 billion (£1.3 billion) off its balance sheet.

However, yesterday's announcement depicted a profit warning, not a loss warning. The bank revealed that it still expected to make a "slight profit" for the fourth quarter of 2009, so there should be no losses to hamper the capital reserves.

In contrast, the European Central Bank was delivered slightly less pessimism last month when it cited that €187 billion of write downs remained in the pipeline in Eurozone banks. It revised its estimate for total eurozone write downs between 2007 and 2010 to €553 billion, up from €488 billion.

A recent research revealed that American house price rises were slowing, prompting economists to predict a rise in mortgage foreclosures.

SocGen has been in a race to compensate from its sub-prime exposure and recover from the fallout from losses approaching €5 billion run up by Jérôme Kerviel, its rogue trader, in 2008.

SocGen shares witnessed a closing fall of 3.4 per cent to €49.88 in Paris.