Nov. 4 (Bloomberg) -- Societe Generale SA, France’s second- largest bank by market value, said third-quarter earnings doubled as its investment-banking unit returned to profit.

Societe Generale rose 4.6 percent in Paris trading after reporting net income of 426 million euros ($627 million), above the 399 million-euro median estimate of 11 analysts surveyed by Bloomberg.

The Paris-based bank, like Deutsche Bank AG of Germany and Switzerland’s Credit Suisse Group AG, benefited in the quarter as improving stock markets and record low interest rates bolstered revenue from its equity and fixed-income businesses. Societe Generale, led by Chief Executive Officer Frederic Oudea, raised 4.8 billion euros in a capital increase last month to pay back state funds and bolster its capital position.

“The results are effectively very robust,” Oudea said in an interview today. “We have to adjust to the most significant crisis in the past 60 years, to a new world, and to new requirements from my clients.”

Societe Generale rose 1.99 euros to 45.64 euros in Paris trading, valuing the bank at 33.8 billion euros. Societe Generale has gained 34 percent so far this year, while BNP Paribas SA, France’s largest bank, climbed 79 percent.

BNP Paribas will probably report third-quarter net income of 1.26 billion euros when it publishes results tomorrow, according to analysts’ estimates.

Investment Bank

Profit at Societe Generale’s corporate- and investment- banking unit amounted to 133 million euros, compared with a loss of 240 million euros a year earlier. Revenue from fixed-income, currencies and commodities climbed to 656 euros from a negative 372 million euros, the bank said, while equities revenue jumped 52 percent to 786 million euros.

“The current environment should be favorable for Societe Generale,” said Alain Tchibozo, a London-based analyst at ING Wholesale Banking. “Fixed income has been a driver for most of the banks that have reported earnings so far and equity revenues are improving.”

Earnings at the investment-banking unit were hurt by revenue writedowns of 751 million euros, mostly related to the tightening of credit spreads. Risk provisions more than doubled to 604 million euros, the bank said.

At the end of September, Societe Generale had 42.4 billion euros of exposure to holdings including asset-backed securities and debt backed by U.S. bond insurers, according to a presentation on the bank’s Web site. Societe Generale reduced the amount of assets at risk by 1.9 billion euros in the third quarter, according to data on its Web site.

The bank has had about 10 billion euros in writedowns and provisions stemming from the financial crisis so far, according to company data.

‘Signs of Improvement’

Oudea, 46, who took over the additional role of chairman in May from Daniel Bouton, is seeking to rebuild profitability at the investment bank almost two years after the company announced a record trading loss.

Oudea is also reorganizing management. Jean-Pierre Mustier, 48, the head of Societe Generale’s investment bank at the time of the 4.9 billion-euro trading loss, left the bank in August. Philippe Citerne, 60, who oversaw the bank’s Russian activities, also left this year.

Earnings at the French consumer banking unit fell 14 percent to 287 million euros in the quarter, even as revenue rose 2.2 percent.

“Underpinned by the stimulus plan implemented by the public authorities at end-2008, the French economy is beginning to emerge from the crisis,” the bank said in a statement. “While corporate investment remains in decline, signs of improvement are starting to appear, notably in terms of household demand and property investment.”

Russia Branch Closures

Profit from international retail banking declined 58 percent to 108 million euros, hurt by losses in Russia, one of its main markets outside France. Societe Generale closed 47 branches in Russia during the quarter.

Financial services earnings dropped 93 percent to 9 million euros, while profit at the global investment management and services unit slipped 1.4 percent to 68 million euros.

Societe Generale’s provisions for doubtful loans more than doubled to 1.5 billion euros from 687 million euros a year earlier. Analysts estimated loan losses of 1.24 billion euros.

The bank’s rights offer, aimed at repaying 3.4 billion euros to the state, will also help it seize “potential” acquisitions, the company has said. Societe Generale has started talks to buy Dexia SA’s 20 percent stake in Credit du Nord, a French consumer-banking network it already controls.

BNP Paribas preceded Societe Generale last month in completing a 4.3 billion-euro share sale to reimburse state aid. France’s top five banks had received about 20 billion euros from the state to boost capital and sustain lending after Lehman Brothers Holdings Inc.’s failure shook markets last year.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

Last Updated: November 4, 2009 12:34 EST