Cash call at a discount as SocGen battles on

The French bank is issuing shares at €47.50 each, 38.9% below Friday's closing price and far greater than the 30% discount expected by analysts and fund managers. It aims to raise €5.5 billion (£4.1 billion) to cover the massive hole left in its balance sheet by Kerviel in the costliest rogue trader scandal in history.

Read the texts sent by Jerome Kerviel which reveal his fear of getting caught

The rights issue came as SocGen admitted its losses related to investments in subprime mortgages in the US would hit €2.6 billion for the year. Analysts today said the rights issue was a huge test of confidence for the bank and the banking sector as a whole as shareholders
may decide not to take it up.

It also leaves SocGen even more vulnerable to a takeover, with rivals such as BNP Paribas and Crédit Agricole waiting in the wings. Foreign banks are interested but the French Government
is reluctant to let SocGen fall into overseas hands.

Even if current shareholders do not take up the new shares, the money is in the bag for SocGen because JPMorgan and Morgan Stanley have agreed to underwrite the bailout. Pierre Flabbee,
an analyst at Kepler Equities in Paris, said the discount "doesn't show great confidence in selling the shares".

Referring to the heavy discount, Flabbee added: "This rights issue is a matter of life or death, and the management may not want to take any risk placing the shares."

JPMorgan and Morgan Stanley were instrumental in keeping SocGen chairman Daniel Bouton in his job in the wake of the scandal. There were calls
for him to quit but the investment banks insisted he remain in place to get today's rights issue away.

SocGen announced plans for the fundraising on 24 January when it unveiled its €4.9 billion of losses from Kerviel's trading positions and a further €2 billion in writedowns for the subprime crisis in the fourth quarter.

Its total writedowns of €2.6 billion are on a par with those of RBS and outstrip the likes of Credit Suisse, Bear Stearns and Goldman Sachs.

Kerviel and his lawyers claim the bank is using his actions to mask its losses on subprime
mortgages.

There was some cheer for SocGen today as it boosted its earlier forecast for profits for 2007. It said last month that it expected to make profits of between €600 million and €800 million but today raised that to €947 million.