SocGen underperforms French rivals in equities trading in second quarter

By Maya Nikolaeva and Julien Ponthus

PARIS (Reuters) - Societe Generale underperformed its French banking rivals in equities trading in the second quarter, reporting lower revenue from that business while BNP Paribas and Natixis achieved significant gains.

Overall, France's second biggest bank on Wednesday reported a 28 percent fall in second-quarter net profit after setting aside 300 million euros ($354.12 million) to pay for potential legal costs, part of the bank's efforts to turn the page following a series of legal disputes and scandals.

SocGen, more focused on equities than its rivals, has shaken up management and invested more in fixed income and prime services, aimed at hedge fund clients, in the past few years to make its investment banking revenue less volatile.

"We have a model which has as an objective a resilient revenue contribution," SocGen's chief executive Frederic Oudea said in a video presentation, posted on the bank's website.

SocGen's shares fell 4 percent in early trading, while the broad European banking index was down 0.3 percent.

"The performance in equity derivative and corporate financing in light of peers is low, part of it could be explained by a high comparison base," analysts at Jefferies said in a note.

BNP Paribas last week reported a 25.7 percent rise in equities trading and prime services, while Natixis posted a 33 percent rise in equity trading.

But SocGen fared comparatively better in fixed income trading, where it reported a 6.8 percent decrease in sales versus a 16 percent drop at BNP Paribas.

SocGen's investment bank accounts for about a third of its revenue.

"While global markets ended the quarter higher, Q2 was marked primarily by the widespread 'wait-and-see' attitude of investors, in conjunction with ever lower volatility and a weaker dollar," SocGen said in a statement.

SocGen said that the quarterly volatility of its corporate and investment banking revenue since the beginning of 2014 has been lower than that of French, European or U.S. rivals.

The bank continued to cut costs in the business in the second quarter, which helped to offset lower revenue from trading and financing and advisory to bring net profit up 11 percent to 499 million euros.

As well as cutting costs, French banks are also aiming to digitise more functions to compete with European rivals, such as Credit Suisse and Deutsche Bank.

SocGen's second-quarter group net income fell to 1.06 billion euros from 1.46 billion euros a year earlier, in line with the average of estimates from five analysts in a Reuters poll.

Group revenues fell 26 percent to 5.20 billion euros, below 5.39 billion euros expected by the analysts. A recovery in retail banking in eastern Europe and Africa helped partly to offset pressure on margins in French retail banking from low interest rates, and a decrease in trading sales.

($1 = 0.8472 euros)

(Reporting by Maya Nikolaeva; Editing by Sudip Kar-Gupta and Jane Merriman)