BNP Paribas Third-Quarter Net Falls 56% on Bad Loan Provisions

BNP Paribas Third-Quarter Net Falls 56% on Bad Loan Provisions


Nov. 5 (Bloomberg) -- BNP Paribas SA, France's largest bank, said third-quarter profit fell 56 percent as provisions for risky loans quadrupled following the collapse of Lehman Brothers Holdings Inc. and the worsening of European economies.

Net income declined to 901 million euros ($1.17 billion) from 2.03 billion euros a year earlier, the Paris-based bank said in an e-mailed statement today. That missed the 1.38 billion-euro median estimate of 13 analysts surveyed by Bloomberg.

BNP Paribas, led by Chief Executive Officer Baudouin Prot, has been among the most adept of Europe's banks at navigating the financial crisis, taking the opportunity to make acquisitions such as the Belgian operations of Fortis. The bank wasn't able to escape the effects of Lehman's bankruptcy, which froze credit markets and forced governments in the U.S. and Europe to aid banks to prevent a financial catastrophe.

``The worsening of the financial crisis weighed heavily on the profitability of the banking industry during the quarter,'' said Prot, 57, in the statement. BNP Paribas's capital position and ``attractive'' businesses give it the means to face ``an environment that will remain difficult,'' he said.

In all, the financial crisis cost BNP Paribas about 1.7 billion euros in provisions and asset writedowns in the third quarter, excluding 123 million euros of gains from its own debt, the bank said. Like smaller Paris-based competitor Societe Generale SA, Prot decided not to use new accounting rules that are less stringent on markdowns.

Investment Bank Profit

The French bank declined 21 percent so far this year in Paris trading, the fourth-best performance in the 69-company Bloomberg Europe Banks and Financial Services Index. Societe Generale, France's second-largest bank by market value, fell 49 percent, while Credit Agricole SA dropped 43 percent.

Profit before tax at BNP Paribas's investment bank fell to 38 million euros from 760 million euros a year earlier. The division, which increased revenue by 4.6 percent, had 1.03 billion euros of loan provisions and 289 million euros of asset writedowns.

BNP did better than investment-banking rivals in Europe. The securities units of Frankfurt-based Deutsche Bank AG, Credit Suisse Group AG and UBS AG of Zurich, and Societe Generale, all reported losses for the quarter.

Lehman, Iceland

Overall, provisions for risky loans soared to 1.99 billion euros from 462 million euros, the bank said, almost triple the 700 million-euro estimate of analysts. The asset-management and investment-banking units took 512 million euros of charges related to Lehman, which went bankrupt on Sept. 15. The investment banking division also set aside 462 million euros tied to debt backed by U.S. bond insurers, and 83 million euros for risks linked to Iceland's banks.

Banks worldwide have reported $691 billion of credit losses and writedowns since the start of last year as the worst U.S. housing slump since the Great Depression battered credit markets, data compiled by Bloomberg show.

Pretax profit at BNP Paribas's asset management unit dropped 71 percent to 134 million euros, missing the 411 million-euro estimate of analysts. The unit added a net 7.4 billion euros in the quarter from client investments.

The French bank last month agreed to take control of Fortis in Belgium and Luxembourg for 14.5 billion euros to gain 3.3 million retail clients and become the biggest lender by deposits in the 15 countries sharing the euro.

BNP Paribas's Tier 1 ratio, a key indicator of financial health, stood at 7.6 percent at the end of September. Including the effects of the Fortis purchase that measure would be close to 8 percent.

BNP Paribas's shareholders equity rose 9.6 percent since the beginning of the year to 40 billion euros at the end of September, excluding effects from the Fortis acquisition. Capital will be bolstered by selling 2.55 billion euros of subordinated debt to the French government.

BLOOMBERG