November 8, 2018 / 7:01 AM / 13 days ago

SocGen's profits rise on Euroclear stake, higher revenues

PARIS (Reuters) - Societe Generale (SOGN.PA) on Thursday reported stronger than expected third-quarter profits, helped by a big one-off gain related to the French bank’s stake in Euroclear and higher overall revenues.

FILE PHOTO: The logo of Societe Generale is pictured outside the headquarters of the French bank at the financial and business district of La Defense at Puteaux near Paris, outside Paris, France, May 16, 2018. REUTERS/Charles Platiau

SocGen made a capital gain of 271 million euros after the bank more than doubled the valuation of its Euroclear stake, which had a 250 million euro positive impact on the bottom line.

Big European banks like SocGen are struggling to boost profitability as low interest rates hurt their traditional lending business, while they have to spend heavily on new technologies to keep up with customer demands.

“Societe Generale published solid results in the third quarter 2018 with a good level of profitability,” Chief Executive Frederic Oudea said in a statement.

The bank’s shares rose 3.6 percent. They are down nearly 20 percent so far in 2018.

Analysts at brokerage Jefferies said SocGen’s results looked positive, although they would look to see if it could continue that trend in forthcoming quarters.

“We need to see a strong performance over consecutive quarters for Societe Generale to see full benefits,” Jefferies said.

Net profits rose 32 percent to 1.23 billion euros ($1.41 billion), above an average profit forecast of 917 million euros in a poll of analysts by Inquiry Financial on behalf of Reuters.

Revenues during the quarter rose 9.6 percent to 6.53 billion euros, above the 6 billion euros expected by the analysts.

SocGen’s French retail bank also performed better than the previous quarter with a 1.8 percent revenue increase, while revenue from its fixed-income, currency and commodity trading division was stable.

SocGen’s stable performance at its fixed-income, currency and commodity trading arms contrasted with its French rivals BNP Paribas (BNPP.PA) and Credit Agricole (CAGR.PA), which both said market trading slumped even though they posted higher overall Q3 profits.

Following its profit increase, the bank said its solvency ratio rose to 11.2 percent and reiterated that it is aiming for a 12 percent ratio by 2020. Societe Generale was France’s weakest performer during stress tests by European regulators, published last week.

The French bank also booked a 136 million euro provision to pay potential settlements with U.S. authorities, mainly over possible sanctions violations.

SocGen had already set aside an amount of 1.1 billion euros to cover a possible settlement on this case. Oudea said the provisions at the current level “put an end to the financial impact” of the dispute.

Societe Generale, which has been dogged for more than a year by a series of costly legal disputes, has regularly raised the provisions set aside to cover potential settlements.

The last case that remains to be settled relates to dollar transfers made on behalf of entities based in countries subject to U.S. economic sanctions.

In June, the bank agreed to pay $1.3 billion to authorities in the U.S. and France to end the disputes over transactions made with Libya and over the suspected rigging of Libor, a key interest rate used in contracts worth trillions of dollars globally.

As part of the settlement process, Didier Valet, SocGen’s deputy CEO in charge of investment banking, left in March.

Reporting by Inti Landauro and Matthieu Protard; Editing by Sudip Kar-Gupta and Jane Merriman

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