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Bumper European bank earnings boost stocks

Canary Wharf, London
Leung | Getty Images
Canary Wharf, London

Some of Europe's largest banks reported better-than-expected earnings on Thursday, despite difficult trading conditions in the region, as a big week for bank results nears its end.

French banking group Societe Generale beat forecasts with its second-quarter earnings, which more than doubled from the same period a year ago. Second quarter net profit came in at 955 million euros ($1.26 billion), above a Reuters consensus of 703 million euros, from 436 million euros in the same period last year.

"I'm very happy with business performance on the French retail, strong growth of revenues plus 3 percent," chief executive Frédéric Oudéa told CNBC. "Good monitoring of costs and a strong improvement of gross operating income...so that's very positive."

The bank's shares closed around 10 percent higher on Thursday.

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U.K. bank Lloyds' results also brought good news for investors – which include the British government. The bank, which is 39 percent state-owned, returned to profit in the first half of the year and indicated that it wouldn't be following in the footsteps of rival Barclays by issuing equity to meet capital requirements set by regulators.

The bailed-out bank reported pre-tax profit of £2.1 billion ($3.2 billion) and said it expected to reach its targets to strengthen its balance sheet faster than it had planned. It also indicated that it would be willing to restart paying dividends to investors.

Lloyds' shares closed around 8 percent higher on Thursday.

Ian Gordon, bank analyst at Investec, said he expected Lloyds to report broadly flat revenues but ongoing reductions in both costs and impairments, looking ahead.

"Together with an expectation of substantially lower net negative exceptional items, this underpins our forecast of an initial return to profit in 2013 [estimated] with some progress towards more "normal" levels of profitability through 2014/15 [estimated]." he said in a note on Thursday.

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In other U.K. banking news, CNBC understands that the Royal Bank of Scotland (RBS) is looking to appoint its former head of retail banking, Ross McEwan, as the new chief executive. McEwan would take the place of ousted CEO Stephen Hester, who announced that he was stepping down last month.

The bank's second-quarter earnings, due on Friday, will be closely watched for confirmation of the appointment. RBS' shares closed 5 percent higher on Thursday.

Earlier this week, fellow-European banks Barclays, UBS and Banco Santander reported earnings that painted a more mixed picture.

Barclays' shares took a tumble after it reported adjusted pre-tax profit that came in below expectations, and announced plans to raise £5.8 billion ($8.9 billion) from shareholders to boost its capital strength.

On a brighter note, Switzerland's largest bank, UBS, reported second-quarter earnings that were in line with expectations and Spain's Santander reported a 29 per cent jump in net profit.

By CNBC's Katrina Bishop. Follow her on Twitter @KatrinaBishop