SocGen's statement on 4.9 billion euro internal fraud

PARIS (Reuters) - Societe Generale, France's second-largest listed bank, said on Thursday it has uncovered a fraud which will have a negative impact of 4.9 billion euros (3.6 billion pound) on the group.

Following is the company's announcement:

January 24, 2008 - For immediate release

Socit Gnrale Group has uncovered an exceptional fraud in a sub-section of its market activities.

The Group expects its net income for 2007 to be in the range of Euro 0.6-0.8billion, including the loss resulting from this fraud and additional US residential mortgage and monoline related write-downs. The Group intends to pay a dividend for 2007 in line with its pay-out ratio target of 45%.

As a result of this fraud and in order to strengthen its capital base, the Group will launch a capital increase of Euro 5.5bn, with preferential subscription rights, which has been fully underwritten by a bank syndicate.

Losses on a fraudulent and concealed position

Socit Gnrale Group (the "Group") has uncovered a fraud, exceptional in its size and nature: one trader, responsible for plain vanilla futures hedging on European equity market indices, had taken massive fraudulent directional positions in 2007 and 2008 beyond his limited authority.

Aided by his in-depth knowledge of the control procedures resulting from his former employment in the middle-office, he managed to conceal these positions through a scheme of elaborate fictitious transactions.