GLE Societe Generale SA

(Updates with earnings details, divestments and information on disputes)

By Pietro Lombardi

Societe Generale SA (GLE.FR) on Thursday reported better-than-expected second-quarter net profit and said it has agreed to sell businesses in Bulgaria and Albania to OTP Bank.

France's third-largest listed bank by assets reported a net profit of 1.16 billion euros ($1.35 billion) for the period, up from EUR1.06 billion a year earlier.

Net banking income--the bank's top-line revenue figure--was EUR6.45 billion, compared with EUR5.20 billion a year earlier when it was hit by a EUR963 million charge to settle a dispute related to transactions involving Libyan counterparts. On an underlying base, which strips out exceptional items, net banking income grew 1%, the bank said.

Analysts estimated Societe Generale's second-quarter net profit at EUR924 million ($1.08 billion) on revenue of EUR6.21 billion, according to a consensus forecast provided by FactSet.

The French bank said it has agreed to sell its majority stakes in Bulgaria's Express Bank and Societe Generale Albania to OTP Bank. It didn't disclose financial details of the deals, but said they should have a positive impact on its CET1 ratio, a measure of capital strength.

Societe Generale said an agreement with U.S. authorities over an outstanding dispute regarding transactions that involve countries subject to sanctions may be found in the "coming weeks." The bank said it is "actively pursuing its discussions" with the authorities, adding that "the timing and the financial impact of a potential agreement remain uncertain."

Societe Generale booked a EUR200 million provision for litigation in the quarter, which takes the bank's overall provision for disputes to EUR1.43 billion as of June.

In June, the bank reached agreements with U.S. and French authorities regarding its alleged manipulation of Libor rates and transactions involving Libyan counterparts. As part of the agreements, the bank said it would pay roughly $1.3 billion in penalties.

The low-interest-rate environment kept weighing on SocGen's French retail revenue, which fell 1.7% on year. The bank expects the division's revenue to be between 1% and 2% lower in 2018. The global banking and investor-solutions business, which includes investment banking and asset management, reported a 0.5% increase in revenue, supported by the resilience of its global-markets business. Fixed income, currencies and commodities, or FICC, revenue declined by 1% on year. As a comparison, French peer BNP Paribas SA's (BNP.FR) second-quarter FICC revenue fell 17%.

"The return of volatility, especially around the Italian elections, enabled flow activities to benefit from a good level of client activity on rates and commodities, which offset a less buoyant credit market," SocGen said.

The bank's core Tier 1 ratio, a key measure of capital strength, fell to 11.1% from 11.2% in the previous quarter.

"Societe Generale posted good results and an increase in profitability in 2Q 2018 due to a solid performance by all the businesses, disciplined cost management and good risk control," Chief Executive Frederic Oudea said.

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

(END) Dow Jones Newswires

August 02, 2018 03:02 ET (07:02 GMT)

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