SocGen Profit Rises 7.8% as Loan-Loss Provisions Decline

Societe Generale SA, France’s second-largest bank, posted a 7.8 percent increase in second-quarter profit, helped by a decline in provisions for doubtful loans.

Net income rose to 1.03 billion euros ($1.4 billion) from 955 million euros a year earlier, the Paris-based bank said in a statement today. That’s the highest quarterly level since mid-2010 and above the 852 million-euro average estimate of eight analysts compiled by Bloomberg.

Chief Executive Officer Frederic Oudea laid out targets in May to boost earnings and increase payouts to shareholders over the next three years, even as tightening capital demands, sputtering economic growth and escalating legal risks drag on profit for Europe’s banks.

The results “confirmed the group’s growth potential and our ability to improve our profitability,” Oudea, 51, said in the statement.

The bank’s shares rose 0.2 percent to 37.61 euros by 9:09 a.m. in Paris trading. Societe Generale has declined 11 percent this year, compared with a 13 percent decline for BNP Paribas SA (BNP), France’s biggest bank.

Societe Generale’s return on equity, a key measure of profitability, reached 8.8 percent in the second quarter, up from 8.4 percent a year earlier. Its goal is to achieve an ROE of at least 10 percent by 2016. The second-quarter results included a 210 million-euro gain from the purchase of derivatives brokerage Newedge Group.

A 24 percent decline in provisions for risky loans to 752 million euros also underpinned earnings, even as the bank set aside an additional 200 million euros for unspecified future litigation costs. That brought Societe Generale’s total legal provisions to 900 million euros.

BNP Loss

BNP Paribas posted a 4.32 billion-euro quarterly loss yesterday after a record penalty for doing business with Sudan and other countries blacklisted by the U.S. Ignoring one-time items, BNP earned 1.92 billion euros in the second quarter, helped by a rebound in capital-markets revenue.

Earnings at Societe Generale’s global markets business rose 17 percent to 349 million euros in the second quarter. Revenue from trading fixed income, currencies and commodities increased 9 percent while equities trading sales were 538 million euros, up 2.9 percent excluding one-time items, it said.

For the five biggest U.S. banks, combined revenue from trading fixed income, currencies and commodities fell 9.4 percent to $12.1 billion in the period, data compiled by Bloomberg Intelligence show.

Societe Generale’s French consumer-banking earnings rose 2 percent in the second quarter from a year earlier to 336 million euros, the company said. The international banking and financial-services unit had a profit of 318 million euros, up 31 percent from a year earlier.

(Source: Bloomberg)