Unexpectedly modest bad debt provisions and an investment banking recovery cushioned Societe Generale against steep falls in second quarter profits and the French bank said there were signs of stabler market conditions ahead.

SocGen said on Wednesday that net income fell 52 percent from last year to 309 million euros, well above the average estimate of 97 million euros from a Reuters poll of 15 analysts and bouncing back from a first-quarter loss of 278 million.

Bad debt provisions of 1.1 billion euros were below estimates of 1.3 billion from the Reuters poll and the investment banking arm's net loss of 12 mln euros compared with average forecasts for a loss of 213 million.

Fighting back since falling victim to a 4.9 billion euro trading loss in January 2008, SocGen saw its investment bank benefit from a recovery in global financial markets, which rebounded in the second quarter from all-time lows caused by the financial crisis. The bank also won several large bond issue mandates.

At 4:11 a.m. EDT, SocGen shares were up 4.6 percent at 48.45 euros, giving the bank a market value of around 29 billion euros. The stock outperformed a 1 percent gain in the DJ Stoxx European bank index <.SX7P>.

It's a good set of underlying figures, said WestLB analyst Christoph Bossmann.

SOME STILL SCEPTICAL

Despite Thursday's share price rise, SocGen's stock has underperformed many other European banks. The stock has risen 35 percent so far this year -- less than the 43 percent gain in the DJ Stoxx European bank index <.SX7P>.

SocGen's results are a mixed picture, said Agilis Gestion fund manager Arnaud Scarpaci, whose firm manages around 100 million euros of assets.

The bad debt charge remains a cause for concern, he said, adding that he preferred BNP Paribas shares to SocGen.

The world's top banks have so far produced a mixed set of results. Earlier this week BNP Paribas, France's biggest bank by market capitalization, posted higher second-quarter profits while UBS reported a loss.

Solid profits from the likes of BNP, HSBC and Goldman Sachs have led some to think that the worst of the financial crisis might be over.

SocGen said in a statement that while the economic outlook remained uncertain, there were signs that market conditions were becoming more stable.

DETERMINED TO STAY INDEPENDENT

SocGen has been treading the path to recovery since getting caught in the trading scandal of 19 months ago, which it blamed on unauthorized deals carried out by Jerome Kerviel, a former junior trader at the bank.

Kerviel remains under formal investigation for breach of trust, computer abuse and falsification.

The losses caused by the Kerviel scandal reignited speculation that BNP Paribas might pounce on its weakened cross-town rival, but SocGen Chief Executive Frederic Oudea said on Wednesday that the bank still aimed to stay independent.

Our strategy of independence is not in question, Oudea told French radio station BFM.

Oudea also reiterated that SocGen itself could consider making acquisitions in areas such as retail and private banking.

(Editing by James Regan, Hans Peters, John Stonestreet)

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