(Agencies)
Updated: 2008-01-26 17:18

The bank's shares, which have lost nearly half their value over the past six months, fell 2.5 percent further Friday to 73.87 euros ($108.62) after an up-and-down day, following on a 4 percent drop Thursday. UBS downgraded the shares Friday bank to neutral from buy, while Deutsche Bank cut them to hold from buy.

However, Dresdner Kleinwort analysts Milan Gudka and Arturo De Frias said the bank's announcement "provides us with greater visibility and comfort. Despite our concern as to the adequacy of internal controls, we keep a positive recommendation on the stock."

The company, which also posted another 2.05 billion euro ($2.99 billion) subprime-related loss, planned to raise 5.5 billion euros ($8.02 billion) in new capital.

Asian sovereign wealth funds had shown interest in Societe Generale before the fraud was announced, but analysts said the news could make the funds think twice about a quick purchase.

Shareholders and others raised questions about how Kerviel was apparently able to dodge the bank's internal controls for more than a year to make the unauthorized market bets.

"One should not be able to take positions worth 40 billion (euros) without being spotted by an audit or a sophisticated computer system," said Didier Cornardeau, president of APPAC, a group representing small Societe Generale shareholders.

French Prime Minister Francois Fillon, meanwhile, said: "It is difficult ... to imagine how one person alone could, in a relatively short period of time, cause such considerable losses."

He suggested the French government should have been informed immediately, instead of four days after the fraud was discovered.

Employed by Societe Generale since 2000, Kerviel worked his way up from a supporting role in an office that monitors trades to a job on the more glamorous futures desk where he invested the bank's own money by hedging on European equity market indices. That means he made bets on how the markets would perform at a future date.

Undetected by the bank's multilayered security systems, Kerviel had for over a year been fraudulently using the company's funds to bet on European stock markets, Societe Generale said.

Kerviel's motive remains unclear. Three union officials representing Societe Generale employees said managers at the bank told them Kerviel was having "family problems."

 

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