Jan. 21 (Bloomberg) -- Societe Generale SA, France’s third- largest bank, broke even in the fourth quarter and said it will receive 1.7 billion euros ($2.2 billion) in a second round of aid from the government to bolster capital and spur lending.

The fourth-quarter results compare with a 3.35 billion-euro loss a year earlier, when the bank booked a record trading loss on unauthorized bets by Jerome Kerviel. For 2008, Societe Generale earned about 2 billion euros, the Paris-based bank said in a statement today.

“They are not what you would call very good results, but it reassures in a market where anxieties are maybe excessive,” said Pierre Flabbee, a Paris-based analyst at Kepler Capital Markets, who has a “buy” rating on the stock.

Chief Executive Officer Frederic Oudea and Chairman Daniel Bouton renounced their 2008 bonuses yesterday, clearing the way for the state assistance to Societe Generale. French President Nicolas Sarkozy agreed to provide a further 10.5 billion euros in aid to the country’s biggest lenders, in exchange for the surrender of bonuses by top executives.

“We ask banks that make a profit to finance the economy,” and not reward shareholders, Finance Minister Christine Lagarde told reporters yesterday after the CEOs of the seven main retail banking networks met Sarkozy and senior aides in Paris. The state wants banks to use earnings to boost shareholder equity, while the more profitable may still pay a dividend, she said.

Societe Generale jumped 10 percent to 27.18 euros in Paris trading, giving the bank a market value of 15.8 billion euros. The stock has fallen 25 percent this year, more than the 22 percent drop of the 64-member Bloomberg Europe Banks and Financial Services Index.

Capital Ratio

“Societe Generale welcomes the rapid implementation of the second stage of the French plan to reinforce the banks’ capital, enabling them to pursue the financing of the French economy while maintaining high solvency ratios,” the bank said.

As a result of the state aid, Societe Generale’s Tier 1 capital ratio will rise to “close to 9 percent” from 8.5 percent at the end of 2008, the company said. The board will decide on the dividend on Feb. 17.

France has earmarked 360 billion euros for its banks, most in the form of guarantees. In exchange, it has prodded them to increase lending, appointing an ombudsman to ensure they are. Last month, the government pumped 10.5 billion euros into the six largest financial institutions.

Debt or Shares

Banks will have a choice to issue by Aug. 31 either subordinated debt, the instrument used in the last aid package, or preferential shares without voting rights, the finance ministry said today. Preferential shares will be better remunerated for the government, with a rate up to twice as high as for debt, it said.

BNP Paribas SA, France’s largest bank, said it may take 2.55 billion euros in government funds under the plan. The Paris-based bank said it will examine the terms of the transaction and will decide by its next board meeting. A sale of ordinary shares to raise capital is not under consideration, it said.

Societe Generale’s fourth-quarter results were underpinned by “resilient activity” in French and international retail banking, the company said. The asset management unit continued to suffer from “outflows and depreciations affecting some asset classes,” the bank said.

Societe Generale and Credit Agricole SA may merge their asset-management units, La Tribune reported today, without saying where it got the information. The banks have been working since last summer to combine Societe Generale Asset Management and Credit Agricole Asset Management, the newspaper said.

‘Large Costs’

“They are two activities that have high costs,” Clemence Bounaix, who helps oversee about $5.2 billion at KBL Richelieu Gestion, said in a Bloomberg Television interview. “It makes sense to become bigger because of these large costs.”

Laura Schalk, a spokeswoman for Societe Generale, declined to comment on the report, as did Credit Agricole spokeswoman Stephanie Ozenne.

Societe Generale’s corporate and investment bank was “close to breakeven” in the fourth quarter, as “resilience” at the fixed-income, currencies and commodities and financing and advisory units offset “limited” trading losses.

“In equity derivatives, the quarter was marked by a poor commercial performance, linked mainly to the wait-and-see attitude adopted by investors,” Societe Generale said.

Societe Generale’s corporate and investment bank performed better than European rivals amid the worst financial crisis since the Great Depression. Deutsche Bank AG, Germany’s biggest bank, last week reported a 4.8 billion-euro fourth-quarter loss on trading losses. BNP Paribas said last month that losses in October and November more than wiped out its securities’ unit profit for the first three quarters of 2008.

Societe Generale will publish detailed financial results on Feb. 18.

To contact the reporters on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net.

Last Updated: January 21, 2009 12:08 EST