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SocGen balance sheet progress lifts shares, outweighs trading weakness

By Maya Nikolaeva
FILE PHOTO: The logo of French bank Societe Generale is pictured at a bank buidling in Paris

By Maya Nikolaeva

PARIS (Reuters) - France's Societe Generale <SOGN.PA> raised its capital ratio on Wednesday, giving its shares a lift despite a profit fall and some parts of its trading business lagging rival banks.

SocGen shares were up 5% to 28.3 euros at 1102 GMT, making the bank's stock one of the top performers on France's CAC40 index <.SX7P>, as investors focused on progress in areas such as the balance sheet.

"We have achieved results very much in line with our objectives and priorities," Chief Executive Frederic Oudea said in a statement as SocGen said its common-equity tier-one ratio rose to 12.5% at the end of September.

SocGen said it had reduced risk-weighted assets, which will allow it to use the funds to support business or to return them to shareholders and reinforced its message that would pay 2019 dividends in cash, rather than paying "scrip" dividends.

Oudea is trying to improve the profitability of SocGen's corporate and investment banking unit by exiting or shrinking some businesses such as commodities trading.

That weighed on its third quarter net profit, which dropped by a sharper-than-expected 34.8%, while SocGen also struggled to perform in businesses it wants to keep, like equities trading.

SocGen said it had exited Serbia and Moldova and freed up capital in corporate and investment banking faster than planned.


TRADING WEAKNESS

Quarterly revenue from trading financial instruments and providing funding to investors fell by 7.6%, reflecting "the first full quarter of lost revenue from business closures".

SocGen is exiting proprietary trading and is cutting back in commodities trading and fixed-income prime brokerage.

It is focusing instead on businesses where it competes on globally such as equity derivatives, where it ranked third in 2018, Coalition data showed.

But it struggled against some of its close rivals in Europe, with its equity trading revenue dropping 20.1% as it cited low currency volatility and volumes on the markets.

That compared to a 15% fall at BNP Paribas, while earnings in this division rose at Barclays and Credit Suisse.

In fixed income, SocGen's trading revenue was up 1% in the third quarter, while BNP Paribas <BNPP.PA>, Barclays <BARC.L> and Credit Suisse <CSGN.S> reported strong gains.

Deputy Chief Executive Severin Cabannes said that despite weaker results its corporate and investment bank kept its market share over the first nine months of the year.

SocGen said its third-quarter net profit was 854 million euros (£735 million), down from 1.31 billion euros in the same period in 2018, when results were boosted by a stake sale.

A Reuters survey of four analysts had on average expected 967 million euros.


(Reporting by Maya Nikolaeva, additional reporting by Laetitia Volga; Editing by Sarah White and Alexander Smith)