French bank Societe Generale unveiled Wednesday a new cost cutting plan of 850 million euros ($925 million) to compensate for higher regulatory costs, despite a jump in profits.
Net profit at the bank jumped by 25 percent for the April through June period from the same quarter last year to 1.35 billion euros, considerably higher than the average of 856 million expected by analysts surveyed by the financial news service FactSet.
The result includes a new provision of 200 million euros for litigation, taking the total to 1.3 billion euros.
Societe Generale did not specify what the provision was for, but its French rival Credit Agricole saw its shares plummet 10 percent on Tuesday after increasing its provisions by 350 million euros as it was in advanced talks with US authorities for violating rules for dollar transactions with countries under US embargoes.
Societe Generale has also been caught up in that US probe, which cost another of its French rivals, BNP Paribas, $8.9 billion last year to settle.
While the bank's second quarter earnings were boosted to the tune of 312 million euros due to a revaluation of its financial liabilities, it also saw improved performance in sectors including French retail banking and investment banking.
Net banking income, a measure of profitability from core banking operations, rose 9 percent to 6.54 billion euros.
Net profit from French retail banking jumped by 20 percent to 419 million euros, while its private banking unit BFI saw its profit climb 15 percent to 691 million euros.
However its international retail banking and financial services unit saw its net profit slide by 6.6 percent to 312 million euros due to troubles in its Russian operations, which lost 45 million euros in the second quarter.
Societe Generale's Russian retail bank, Rosbank, posted a net loss of 61 million euros, which was half the amount lost in the first quarter of the year.
Despite Russia's continuing economic crisis, Societe Generale said loan issuance levels were normalising after having adopted a more selective approach and it had cut costs by eliminating 1,200 posts in the country during the second quarter.
- Further cost cutting -
Societe Generale, which made 97 percent of the 870 million savings envisaged in a 2012 cost-cutting programme, unveiled new targets.
"Projects to simplify the organisational structure, improve efficiency, reinforce controls on externalised costs and review and simplify transactions with customers will enable the Group to generate 850 million euros in additional savings by 2017," Societe Generale said in a statement.
The bank did not specify the impact on jobs of the cost-cutting plan, which aims to keep the bank competitive as regulatory costs rise.
The bank's chief executive, Frederic Oudea, expressed satisfaction with the results.
"Mid-term, the Group is on track to achieve all the targets set," he said in a statement.
"All the Group's businesses have posted earnings in line with or above the targets, with the exception of Russia where the situation is gradually normalising," he added.
Investors welcomed the results, sending the bank's shares up 7.8 percent to 48.13 euros in early trading, while the Paris CAC 40 index was up 0.93 percent overall.