May 6, 2022: -On Tuesday, French lender Societe Generale (SocGen) said it would have additional costs due to the war in Ukraine amid more customers would be unable to repay their loans, underscoring the economic damage in Europe.

France’s third-biggest listed bank, announcing an increase in net income as its domestic retail arm prospered and trading improved, said it set aside higher provisions for soured loans because of the conflict.

SocGen added that it now expected its cost of risk, reflecting lousy loan provisions, to hit 30 to 35 basis points, or 1.7 to 1.9 billion euros, in 2022, instead of under 30 basis points as expected initially.

Those costs come on top of earlier write-downs. The bank said it would quit Russia and sells its local arm Rosbank, which is nearly 3.1 billion euros.

“We have provisions linked to our business in Russia onshore, which as we complete the sale is going to go away, together with the assets, and then we have the offshore exposure, where we have 2.8 billion in terms of our global banking, investment banking business there,” SocGen Deputy CEO Slawomir Krupa told CNBC.

“Here it’s many ECA backed, structured credit, secured exposure. We believe we have less than a billion euros of really at-risk exposure, so largely manageable and so far with minimal actual defaults or actual issues, but we are prudent in provisioning this exposure.”

SocGen helped compensate for this with solid trading. Revenue in equity trading was up nearly 20 percent, at over 1 billion euros.

SocGen’s net income surged by 3.4% to 842 million euros in the first quarter, with revenue up by 16.6%.

The exit from Russia has nonetheless is reducing the bank’s capital cushion. Its standard equity tier one ratio, a critical yardstick of capital strength, was 12.9% in March-end.

SocGen this month became the first central Western bank to announce its exit from Russia, wanting to sell its Rosbank unit to Interros Capital, a firm linked to Russian oligarch Vladimir Potanin.