The Chairman
Dear Sir, Dear Madam,
At the start of the week, Société Générale was getting ready to announce pre-tax income in excess of 5.5 billion euros for 2007 despite the significant cost of the financial market crisis, thereby proving the Group’s capacity to absorb the very serious crisis. It was against this backdrop of extreme volatility that you are aware of that a fraud of an unprecedented size was uncovered last weekend, committed by a trader in our equity division. Our priority was to cut off the colossal position that he had created, and concealed, as quickly as practicable.
We informed the Bank of France, the AMF, our statutory auditors and the Audit Committee of Société Générale as soon as we became aware of the fraud. The position had to be unwound in very difficult market conditions this week. The result was a sizeable loss.
The trader responsible for the fraud was immediately suspended. He will leave the Group, along with the individuals in charge of his supervision.
The combined impact of the financial crisis and the exceptional fraud will, nevertheless, enable the Group to generate net income of 700 million euros for the full year.
Between Sunday January 20th and Wednesday January 23rd, a recapitalisation operation of 5.5 billion euros was put in place. In three days, two large international banks, J.P. MORGAN and MORGAN STANLEY agreed to guarantee the operation, which reflects Société Générale’s strength. This recapitalisation will keep shareholders’ equity at the same levels as the world’s best banks. It will help us continue our development in keeping with the excellent performance of previous years.
I am very sorry to have to announce this extremely bad news to you. I am fully aware of the impact that it may have on our company’s image and on yourselves and I present my sincere regrets, on behalf of all the members of the COMEX.
We will triumph over this twofold crisis, the like of which has never been seen before, using the qualities which we have established in recent years and all of your individual talents, which are greatly appreciated. As a result, I remain confident in Société Générale’s prospects and in its capacity to generate profitable growth which I am sure you share with me.
The Board renewed its confidence in me and asked me to continue my mandate. You can count on me, as I know I can count on you, to get through this difficult period.
Daniel Bouton