Croissant?

Societe Generale SA reported a 4.9 billion-euro ($7.1 billion) trading loss, the largest in European history, and accused an unidentified trader of fraud after wrong-way bets on stock index futures.

France's second-largest bank by market value plans to raise 5.5 billion euros from investors after the trading loss and subprime-related writedowns depleted capital, the Paris-based company said today. The Bank of France, the country's banking regulator, said it's investigating the situation.

The trading shortfall rivals the $6.6 billion Amaranth Advisors LLC lost in 2006, and is more than three times the $1.8 billion of losses by Nick Leeson that brought down Barings Plc in 1995. An offer by Chairman Daniel Bouton to resign after the trades were discovered this past weekend was refused by Societe Generale's board, the bank said.

``At first this seemed like a joke,'' said Nicolas Rutsaert, an analyst covering European banks at Dexia SA in Brussels. Societe Generale ``was a leader in derivatives and was considered one of the best risk managers in the world.''

Societe Generale shares were suspended before the start of trading in Paris today. The stock fell 20 percent since the beginning of the year on concern about more writedowns related to the U.S. subprime mortgage crash.

Credit-default swaps based on the debt of Societe Generale rose as much as 10 basis points to 95 basis points today, and traded at 85 basis points at 7:46 a.m. in London. The contracts, which increase as default risk rises, were at 50 basis points a week ago.

Derivatives Leader

Societe Generale has ranked first or second during the past five years in client surveys of equity derivative firms, according to Risk Magazine. In 2007, it received the award for ``Equity Derivatives House of the Year'' from The Banker, a London-based monthly magazine.

The trading loss wipes out almost two years of pretax profit at Societe Generale's investment-banking unit. The company has started disciplinary proceedings against the trader and fired his managers, Bouton said.

``The transactions that were built on the fraud were simple, positions linked to rising stock markets, but they were hidden through extremely sophisticated and varied techniques,'' Bouton said in a letter posted on the bank's Web site.

The bank said it will post a profit of between 600 million euros and 800 million euros for 2007 and pay a dividend equal to 45 percent of its earnings. ``Most of the sectors, in France and abroad, continue to produce good, and sometimes excellent results,'' Bouton said.

The company said it plans to raise the capital by selling shares in a rights offer underwritten by JPMorgan Chase & Co. and Morgan Stanley.

Calyon Losses

Societe Generale's report of fraud comes four months after French competitor Credit Agricole SA said an unauthorized proprietary trade at its investment-banking unit in New York cost it 250 million euros.

Societe Generale said that it has already closed all the positions set up by the trader, who had used his experience working in the back office to hide his trades through fictitious transactions.

Societe Generale said it's taking 1.1 billion euros of writedowns linked to the U.S. residential real estate market, 550 million euros related to U.S. bond insurers, and 400 million euros on other unspecified risks.

In the third quarter, the bank reported 375 million euros of writedowns and trading losses linked to turmoil in financial markets. The world's biggest financial companies have announced more than $120 billion in writedowns and credit losses as the U.S. housing slump rattles debt markets.

Societe Generale's exposure to bonds backed by home loans is now down to 35 million euros, the bank said.