By Noemie Bisserbe 


  PARIS-French bank Societe Generale SA reported a rise in second-quarter net profit Friday, helped by lower provisions against bad loans, and despite a weak Russian business hurt by the sluggish local economy. 


  The Paris-based lender, France's third-largest listed bank by assets, said second-quarter net profit increased by 7.8% to 1.03 billion euros ($1.34 billion) from EUR955 million a year earlier. 


  Bad debt provisions, which exclude money the bank sets aside against possible litigation liabilities, fell by 22.6% to EUR752 million compared with EUR985 million in the same period last year. 


  The bank's global banking and investor solutions division, which includes its corporate and investment bank, asset management, private banking and its securities services businesses, posted a 28% jump in net profit to ?585 million. Revenues were up just 2.4% but the bottom line was boosted by a net bad debt provision write-back of EUR28 million. 


  In Russia, however, net profit dropped by 36% to EUR16 million from EUR25 million a year ago, as a weak ruble and a weakening economy continued to take its toll. 


  While Russia currently accounts for only about 5% of the group's total revenue, Societe Generale once had big ambitions in the country, betting that local lender Rosbank would help drive growth as Europe struggled to pull itself out of the financial crisis. 


  The French bank bought a 20% stake in Rosbank for $634 million in 2006. Since then it has spent over EUR4 billion building a 99.4% stake, integrating its back-office and technology platforms, shaking up management and cutting more than 2,500 jobs. 


  Societe Generale cautioned that sanctions against Russia, even though they don't directly target Rosbank, could hamper revenue going forward. 


  "Possible consequences could be a loss of earnings if certain transactions can't go through," deputy chief executive Bernardo Sanchez Incera told reporters on a conference call, adding, however, that he didn't see any short-term impact for the bank. 


  The U.S. and the European Union this week adopted sweeping economic sanctions against Russia to punish Moscow's unbending stance in Ukraine conflict. EU governments agreed on trade and investment restrictions against Russia's banks, oil industry and military aimed at increasing financial strains in its already sluggish economy. 


  Societe Generale has also set aside an additional EUR200 million to cover potential litigation risks but didn't give any details on the provision. This took the total provision for litigation risk to EUR900 million. 


  The bank is currently conducting an internal review into potential U.S. sanctions breaches. It has also received formal requests for information as part of global probes into alleged attempts to manipulate benchmark interest rates. 


  Three years of restructuring has helped the bank significantly improve its financial strength and set aside enough capital to absorb any potential future losses. 


  Societe Generale's core tier one ratio, which compares top-quality capital such as equity and retained earnings with risk-weighted assets, stood at 10.2% at the end of June, above the 8% minimum required by regulators by 2019. 


  Its leverage ratio, which measures capital against total assets, was 3.6%, higher than the 3% threshold set for 2018. 


  French retail banking net profit was up 2% at EUR336 million, while net profit for its international retail network rose 31% to EUR318 million. 


  Societe Generale's overall revenue fell 3.7% to EUR5.89 billion from EUR6.12 billion in the same quarter last year. 


  French rival BNP Paribas SA on Thursday reported a EUR4.32 billion second-quarter loss after it agreed to pay a nearly $9 billion fine and plead guilty to violating U.S. sanctions against Sudan, Iran and other countries. 


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


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  August 01, 2014 11:11 ET (15:11 GMT)