SocGen Q3 Net Profit More Than Doubles on CIB

(Adds CEO comment.)

PARIS -(Dow Jones)- French bank Societe Generale SA (GLE.FR) said Wednesday that third-quarter net profit more than doubled as a continuing improvement in market conditions boosted earnings at its corporate and investment bank.

Net profit rose to EUR426 million from EUR183 million in the same period last year and undershot an average forecast of EUR524 million in a Dow Jones Newswires poll of five analysts.

SocGen, France's second-largest bank by market capitalization behind BNP Paribas SA (BNP.FR), said that although economic prospects remained uncertain, the normalization of market conditions underway since the beginning of 2009 intensified during the third quarter.

"In this environment, corporate and investment banking achieved another excellent operating performance thanks to its well-balanced business portfolio," the bank said in a statement.

Revenue at SocGen's corporate and investment bank almost tripled to EUR1.77 billion, pushing the unit to a net profit in the third quarter of EUR133 million from a loss of EUR240 million a year earlier.

The result was driven by the bank's equities and derivatives business. Revenue from fixed income, currencies and commodities declined from the record levels seen in the first half but remained well above pre-crisis levels, the bank said.

Chief Executive Frederic Oudea told CNBC television that the macroeconomic outlook remains positive but declined to give any firm guidance for the rest of the year.

Asked about recent rumors of a possible tie-up with BNP Paribas or Credit Agricole SA (ACA.FR), all of which have been denied, Oudea said it was a "paradox that while regulators are still talking about reducing the size of banks, that these sorts of rumors still crop up."

He said the crisis will have an impact on the shape of some banks but will most likely involve small strategic acquisitions rather than transforming deals.

On the negative side, the unit booked a loss of EUR751 million related mainly to tightening credit spreads, and more than doubled new loan-loss provisions to EUR604 million, the bank said.

Credit Suisse analyst Guillaume Tiberghien said the performance of SocGen's CIB unit was strong despite slightly higher-than-expected provisions. He said the discount between SocGen's shares and the sector should narrow in coming months as earnings are becoming more visible.

"In previous quarters, the good underlying (result) was hidden by a high level of mark-downs," Tiberghien said. He rates the stock neutral with a EUR52 price target.

SocGen shares made firm gains following the earnings release. At 1040 GMT, they were up EUR2.15, or 5%, at EUR45.80, outperforming the Stoxx Europe 600 banks index, which was up 2.2%. The shares are up almost 35% since the beginning of 2009, and have risen more than 15% in the past year.

SocGen's consolidated revenue rose 17% to EUR5.97 billion from EUR5.11 billion a year earlier.

The bank said French retail banking benefited from the country's return to economic growth, with revenue rising 2.2% to EUR1.81 billion, although new provisions were hiked 90% to EUR220 million.

On the other hand, international retail banking continued to suffer from the economic slowdown in some of the bank's key foreign markets, particularly in Russia and Eastern Europe, pushing revenue at the unit down more than 10% to EUR1.17 billion, and reducing its contribution to consolidated net profit by 58% to EUR108 million.

"International retail was marginally weaker than we anticipated pre-provision, but this is mostly due to the forex impact," Credit Suisse's Tiberghien said.

The bank said it successfully completed EUR4.8 billion capital increase puts it in a strong position to emerge from the recent crisis. The money it raised is being used to repay EUR3.4 billion worth of government aid and to buy out a 20% stake in its Credit du Nord unit from French-Belgian bank Dexia SA (DEXB.BT).

Following the capital increase, SocGen had a pro-forma Tier 1 ratio at Sept. 30 of 10.8%, and a core Tier 1 ratio of 8.6%.

SocGen is the first of France's biggest banks to report third-quarter earnings. BNP Paribas reports Thursday.

-By Digby Larner, Dow Jones Newswires; +33 1 4017 1748; digby.larner@dowjones.com

(END) Dow Jones Newswires

11-04-09 0603ET