August 1, 2014 / 1:26 PM / in 3 years

UPDATE 1-SocGen keeps faith with Russian growth story

* Quarterly net up 7.8 pct to 1.03 bln euros ($1.38 bln)

* Says “commercial momentum remained healthy” in Russia in Q2 (Recasts with CEO comments on Russia)

By Matthias Blamont and Andrew Callus

PARIS, Aug 1 (Reuters) - French bank Societe Generale kept faith with its plans for growth in Russia on Friday a day after new EU sanctions targeted the Russian financial sector.

“On the sanctions, what we are thinking is we will apply them with a lot of discipline,” said Chief Executive Frederic Oudea.

“As an important player in finance and the economy we do not expect any retaliatory measures (from Moscow) and there is no ‘just in case’ plan. We are continuing our transformation plan with good results in this first half, and with a long-term perspective.”

Oudea spoke as France’s second-largest bank reported a 7.8 percent rise in net profit to 1.03 billion euros ($1.38 billion) for the second quarter helped by lower expenses and a reduced cost of risk.

Revenue fell to 5.893 billion euros from 6.120 billion a year earlier.

The result benefited from operating expenses that were down 1.3 percent and loan loss provisions which also fell.

SocGen also saw a 210 million euro gain related to the acquisition of the 50 percent of brokerage Newedge it did not already own.

Analysts noted a strong performance by its Corporate and Investment Banking (CIB) division.

Russia is a growth market for SocGen but this year its strategy there has been overshadowed by the Ukraine crisis and the West’s reaction to Russia’s role in it.

Russia accounted for 7 percent of SocGen’s 2013 revenue. In Friday’s results the bank said “commercial momentum remained healthy” there with outstanding loans up 5.3 percent.

In the first quarter, the bank took a 525 million euro writedown on its main Russian investment, Rosbank, citing heightened uncertainty as well as a weaker Russian rouble.

It has said it aims to maintain its exposure at a moderate level of 3 percent of outstanding loans.

The European Union on Thursday published a law that will curb arms sales to Russia and cut off financing for five major Russian banks over Moscow’s support for rebels in Ukraine.

Russia has denounced the measures, agreed by the 28 EU member states, as “destructive and short-sighted”, while fighting has intensified in eastern Ukraine between Kiev forces and pro-Russian separatists.

The toughest measures aim to prevent Russian banks from raising money on Western capital markets, while others limit defence sales and the export of hi-tech equipment for the oil sector. (1 US dollar = 0.7469 euro) (Editing by James Regan and Jason Neely)

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