French bank Societe Generale warned the economic recovery was still fragile, with moderate growth prospects in Europe, after it beat forecasts with an almost fourfold leap in second-quarter net profit.

The bank, which last month easily passed a Europe-wide stress test with a Tier 1 capital ratio of 10 percent, said on Wednesday it was confident of hitting long-term targets under its Ambition 2015 strategic plan that include a 2012 net profit of 6 billion euros ($7.8 billion).

SocGen is battling to restore investor confidence after the financial crisis with a new management team under Chief Executive Frederic Oudea.

Its shares have underperformed the sector this year in part due to investment banking concerns, worries over wholesale funding and its exposure to toxic assets.

(The outlook) is SocGen saying 'don't get your expectations up'...Last year they didn't highlight issues properly, now what they've shown in this quarter is that they've learned from that and are under-promising to over-deliver, a London-based analyst said.

The group's second-quarter results mirrored larger rivals BNP Paribas and Britain's HSBC , which saw strong retail banking and falling loan provisions offset weaker investment banking revenue.

Several analysts said SocGen showed more positive signs than BNP, with retail banking revenue up more than forecast in France and abroad and a smaller-than-expected hit from volatile markets on investment banking.

It's not just provisions driven, importantly (SocGen's profit jump) is being driven by more retail and asset-gathering than the core corporate and investment banking business, another analyst said, citing slowing outflows at U.S. unit TCW.

LESS TOXIC

SocGen reported second-quarter net profit of 1.08 billion euros, up from 309 million a year ago when heavier provisions and asset writedowns weighed on the bottom line.

This comfortably beat the average forecast in a Reuters poll of 11 analysts of 732 million euros.

SocGen is whittling down its portfolio of toxic assets, which had a second-quarter impact of 27 million euros on net profit, much lighter than the year-ago hit of 130 million.

The overall 2010 impact of these assets is now expected at the bottom end of previous guidance of between 700 million and 1 billion euros before tax, SocGen said.

The bank's revenue also beat forecasts, up 16.8 percent, as did loan provisions, though they did not fall by as much as at BNP and HSBC. SocGen has more geographical exposure to risky markets like Romania and Greece, where it owns Geniki , and warned risk was still high on some French businesses.

The impact on investment banking from difficult second-quarter markets was more limited than at BNP, with SocGen reporting a 65 percent drop in equities revenue and a 40 percent fall for fixed income.

Like BNP, SocGen also reported gains on the falling value of its own debt, which brought a revenue boost of 254 million euros.

SocGen shares are down 7.3 percent this year, underperforming a 4 percent rise on the STOXX Europe 600 banks index <.SX7P>. The bank has a market value of 34.6 billion euros.

($1=.7650 Euro)

(Reporting by Lionel Laurent; Editing by James Regan and David Cowell)

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