Société Générale SA said Wednesday second-quarter net profit jumped 25%, lifted by the performance of its large equity and derivatives trading business and a debt valuation adjustment.
The Paris-based lender, France’s third-largest listed bank by assets, said net profit rose to EUR1.35 billion ($1.47 billion) in the three months through June, from EUR1.08 billion a year earlier.
It booked a EUR312 million gain due to an accounting rule that permits banks to post paper profit when the value of their own credit declines.
Revenue increased by 16% to EUR6.87 billion from EUR5.9 billion in the same period last year.
Société Générale’s second-quarter earnings reflect the strong performance of investment banks across Europe and the U.S., helped by volatile currency and equity markets, especially in Asia. The bank’s revenue growth in France also highlights a firm pickup in loan demand, as the country’s economy steadily recovers.
Equity trading revenue soared 61% to EUR799 million in the second-quarter, pushing the bank’s total revenue for its global banking and investor solutions division–which includes investment banking, security services and asset management–up 17% to EUR2.68 billion.
In France, retail banking revenue rose 4% to EUR2.15 billion from EUR2.07 billion in the same quarter last year.
Revenue for its international retail banking and financial services division was, however, down 2% at EUR1.85 billion, as the bank continues to suffer from its exposure to Russia. Société Générale posted a EUR45 million loss in Russia in the second-quarter, hurt by a faltering economy.
Despite losses in Russia, the bank said it was “well on track” to meet its profit target of a return on equity, which gauges profitability, of 10% by 2016 compared with 7.3% in 2014, excluding exceptional gains and potential penalties.
The bank said it planned new cost cuts of EUR850 million by the end of 2017.
Strong revenue growth also helped the bank raise its capital cushions and to meet tighter regulation.
Société Générale’s core tier-one ratio, which compares top-quality capital such as equity and retained earnings with risk-weighted assets, stood at 10.4%, up from 10.1% at the end of March.
The bank’s leverage ratio, that measures capital held by the bank against its total assets, also rose to 3.8%, from 3.7% at the end of March.
Société Générale said it targeted a core tier-one ratio of close to 11% and a leverage ratio of 4% to 4.5% by the end of 2016.
source: Market Watch