Paris - Societe Generale SA, France’s second-largest bank by market value, reported the highest profit since the financial crisis on a surge in equities revenue and announced plans for fresh cost cuts.
Net income rose to 1.35 billion euros ($1.47 billion) in the second quarter from 1.08 billion euros a year earlier, the Paris-based company said on Wednesday. Quarterly earnings were the highest in eight years and surpassed the 1 billion-euro estimate of four analysts surveyed by Bloomberg.
The European Central Bank’s unprecedented stimulus is underpinning an economic recovery, pushing stock markets up and squeezing interest rates. Societe Generale recorded a 61 percent increase in equities trading income in the quarter. The bank also said it will lower costs by 850 million euros by 2017 to counter rising regulatory expenses and investments in digital technology.
Societe Generale’s earnings show “the capacity to execute with discipline its strategic plan”, Chief Executive Officer Frederic Oudea said in a statement. “All the parts of the group posted results in line with or superior to the objectives, with the exception of Russia, where the situation is progressively normalising.”
The bank’s shares are up 28 percent this year, outpacing the 16 percent advance in the EURO Stoxx Banks Index, which tracks 29 companies.
Capital target
Societe Generale’s equities trading revenue jumped to 799 million euros in the quarter from 496 million euros a year earlier. Corporate financing and advisory revenue rose about 26 percent to 685 million euros, while fixed-income sales fell 15 percent.
The bank’s common equity Tier 1 ratio, a key measure of financial strength, rose to 10.4 percent at the end of June from 10.1 percent on March 31. The company raised its target to 11 percent by the end of 2016 from at least 10 percent.
Its French consumer-banking network had 419 million euros in second-quarter profit, up from 348 million euros a year earlier, the bank said. Revenue increased 4.2 percent, while the risk provisions declined by almost a third.
Societe Generale set aside 200 million euros in legal provisions in the quarter, bringing its total to 1.3 billion euros, the bank said. The quarter’s profit was boosted by a 312 million-euro gain related to the revaluation of the bank’s own debt.
Profit from international retail banking fell 6.6 percent to 312 million euros, hurt by a 45 million-euro loss in Russia, Societe Generale’s second-largest market by staff. Despite a contraction of the Russian economy, Societe Generale’s local unit halved its loss from the first quarter and cut 1 200 jobs.
BLOOMBERG