Societe Generale sees profit jump, hikes capital

France's second-largest listed lender, Societe Generale posted a better-than-expected 25 percent increase in net income in the three months to June of this year as the bank said it planned to hike its capital buffer.

The group saw its profits climb 25.2 percent to $1.35 billion in the second quarter, outstripping analyst expectations, as it said it would target higher cost savings and up its capital ratio.

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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 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.

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