GLE Societe Generale SA

--Societe Generale's core Tier 1 ratio rose to 12% at the end of June from 11.5% in March

--SocGen's quarterly net profit fell 14% to 1.05 billion euros

--Shares rise more than 5% in morning trade

 
   By Pietro Lombardi 
 

Societe Generale SA (GLE.FR) shares jumped after the bank strengthened its capital in the second quarter, while lower revenue and restructuring costs contributed to a fall in net profit for the period.

The results follow a consensus-beating performance by French peer BNP Paribas SA (BNP.FR) and come as SocGen restructures after weak trading revenue hit its investment-bank business in the final quarter of last year, forcing the bank to cut its 2020 profitability target and promise further cost cuts.

SocGen's core Tier 1 ratio, a key measure of capital strength, rose to 12% at the end of June from 11.5% in March, helped by the sale of some businesses and the payment of part of its dividend in shares.

"Based on what has been achieved in H1 2019 the capital debate is no longer an issue, if they are able to stick to the plan," Jefferies analysts said.

Quarterly net profit fell 14% to 1.05 billion euros ($1.16 billion), France's third-largest listed bank by assets said Thursday.

Net banking income, the bank's top-line revenue figure, fell 2.6% on the year to EUR6.28 billion.

The bank showed continuing improvement in capital, Citi analysts said.

"These results are a step in improving market confidence on management ability/focus to deliver," Citi said.

Shares traded 5.1% higher at 0755 GMT.

"Societe Generale has provided further evidence of the successful execution of its strategic plan with two priority financial objectives: increasing its level of capital and improving profitability," Chief Executive Frederic Oudea said.

SocGen booked a EUR227 million charge related to the restructuring of its corporate and investment banking business.

In April, the lender presented a plan to cut nearly 1,600 jobs globally after a slump in investment-banking revenue in the fourth quarter. The plan followed a cut to its 2020 profitability target. The global markets and investor services--which includes fixed income and equity trading and securities services--will bear the brunt of the job cuts.

"Only a few months after it was announced, Global Banking & Investor Solutions' adaptation plan has entered the execution phase," Mr. Oudea said.

The global banking and investor-solutions business, which includes investment banking and asset management, reported a 6.1% fall in second-quarter revenue, while profit fell 46%. Global markets revenue fell 9.2% "impacted by still challenging market conditions," it said. Fixed-income revenue declined 9.7% on year.

"The low interest rate environment in Europe and low volatility observed in currency activities adversely affected Rate and Currency activities" in the second quarter, it said.

Equities revenue fell 6.6%.

Net income fell 2.5% at the bank's French retail banking operations while it was down 4.8% at the international retail banking & financial services division.

Write to Pietro Lombardi at pietro.lombardi@dowjones.com

(END) Dow Jones Newswires

August 01, 2019 04:25 ET (08:25 GMT)

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