CRARY Credit Agricole SA (PK)

PARIS—French banks Cré dit Agricole SA and Socié té Gé né rale SA on Wednesday reported a bigger-than-expected jump in second-quarter net profit, as the sale of their respective shares in Visa Europe helped offset pressure from volatile markets and persistently low interest rates.

Cré dit Agricole's net profit rose 26% to €1.16 billion ($1.30 billion) in the three months to the end of June, while at Socié té Gé né rale it increased 8% to â,¬1.46 billion. Revenue rose by 2% at both banks, to €4.74 billion at Cré dit Agricole and to €6.98 billion at Socié té Gé né rale.

The Visa Europe stake sale gave Cré dit Agricole a gain of €328 million and Socié té Gé né rale €725 million.

The forecast-beating results cheered investors and In early trading Wednesday Cré dit Agricole were up 2.9% while Socié té Gé né rale's rose 3.1%.

Capital gains and a balanced business mix have helped French banks navigate a difficult economy and choppy markets this quarter. French lenders fared better than some of their European rivals such as Credit Suisse Group and Deutsche Bank AG, that were badly hit by a drop in equity trading and the impact of stricter financial regulation.

Cré dit Agricole said that insurance, asset management and a strong specialized financial services business helped make up for a lower net profit from its investment bank.

Its insurance and asset management business reported an 8% increase in net profit to €415 million, while net profit for its specialized financial services business rose 23% to €154 million.

Net profit at its corporate and investment bank fell 8% to €365 million under pressure from volatile markets.

Cré dit Agricole's domestic retail arm, LCL, also reported a 38% drop in net profit to €108 million, hurt by persistently low interest rates.

At Socié té Gé né rale, international retail banking and financial services helped offset sharply lower trading.

Its international retail banking and financial services division posted a 36% jump in second-quarter net profit to €436 million, while its global banking and investor solutions business—which includes investment banking, security services and asset management—posted a 36% drop in net profit to €448 million.

Net profit at Socié té Gé né rale's retail bank in France was also down 5% at €403 million.

The two banks said their capital buffers remained comfortably above regulatory thresholds.

Socié té Gé né rale's core tier one ratio, which compares top quality capital such as equity and retained earnings with risk-weighted assets, was stable at 11.1% in June while at Cré dit Agricole's it rose to 11.2% in June from 10.8% in March.

The sale of Cré dit Agricole's 25% stake the bank holds in the group's regional lenders should help lift its core tier one ratio to 11.9%.

The bank, which is 56%-owned by the group's regional cooperative lenders, said in February it would sell back the 25% stake it holds in the group's regional lenders to ease concerns about its capital strength.

Cré dit Agricole said on Wednesday that it would book a €1.25 billion gain on the stake sale in the third quarter of 2016.

Write to Noemie Bisserbe at noemie.bisserbe@wsj.com

(END) Dow Jones Newswires

August 03, 2016 04:55 ET (08:55 GMT)

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