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Societe Generale surges 8% on earnings beat

Shares in France's second-largest listed lender, Societe Generale topped European benchmarks on Wednesday, rallying over 8 percent after it posted second quarter earnings that saw strong profit growth, as the bank upped its core capital ratio target.

The group posted a better-than-expected 25 percent increase in net income in the three months to June of this year, sending shares to the top of the pan-European Eurostoxx 600, trading at 48.24 euros ($52.48).

The group saw its profits climb 1.35 billion euros in the second quarter, outstripping analyst expectations of 969 million euros, as it said it would target higher cost savings and up its capital ratio.

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Societe Generale SA headquarters in Paris, France.
Balint Porneczi | Bloomberg | Getty Images
Societe Generale SA headquarters in Paris, France.

The lender said its profits were boosted by a bumper quarter in equities trading in Europe and an influx of new clients. Its corporate and investment banking arm posted growth of 16 percent, with equities activities surging some 60 percent compared to the same quarter a year earlier.

Soc Gen also said its extra capital buffer of common equity tier 1 would come from earnings rather than eating into investor dividends as it upped its 2016 target to 11 percent, up from current levels of 10.4 percent and its previous target of 10 percent.

Revenues in its fixed income, currencies and commodities fell close to 15 percent in the second quarter, as a result of the reduced liquidity and the "wait-and-see attitude" in markets throughout the period.

The firm told CNBC its rates and credit divisions had also been hit by the volatility caused by the European Central Bank's (ECB) quantitative easing (QE) plan, which was launched in March of this year.

"Halfway through our 2016 strategic plan, all our businesses are in line or above their target, except for Russia where the situation is normalizing," deputy chief executive of the bank, Severin Cabannes told CNBC.

The bank said its banking revenues grew in all regions apart from Russia, where the bank said business activity was "persistently weak".

Looking ahead to the rest of the year, Cabannes said he expected to see a period of continuing recovery in Europe, coupled with heightened market volatility due to central bank activity.

"For the next 18 months, we are expecting a continuing recovery in Europe. The global macroeconomic situation should continue to recover thanks to low interest rates, low energy costs," he said.

"Globally speaking there will still be high volatility in the markets in our view, mainly due to the Federal Reserve decision on interest rates and the of the ECB QE policy, which creates in some cases some very rapid and sharp movements in the markets. So we have to remain prudent and vigilant because the market volatility will remain a characteristic in our view for the next period of time," Cabannes added.