Second quarter profit dips at BNP Paribas
Europe’s economic slump curbs lending in France and Italy, increases loan-loss provisions
Europe’s economic slump curbed lending in France and Italy, lead to an increase in loan-loss provisions at BNP Paribas in the second quarter.
Profit at France’s largest bank, BNP Paribas , fell 4.7 per cent in the second quarter as Europe’s economic slump curbed lending in France and Italy and led to an increase in loan-loss provisions.
Net income declined to €1.76 billion from €1.85 billion a year earlier, the Paris-based bank said in a statement today. Earnings compared with the €1.62 billion estimate of six analysts surveyed by Bloomberg.
Revenue slid 1.8 per cent to €9.92 billion, while operating expenses declined 0.7 per cent.
BNP Paribas, headed by chief executive Jean-Laurent Bonnafe, is expanding in Germany and Asia while the economic downturn in its main European markets weighed on growth. The bank set aside €1.1 billion for loan losses in the quarter, up 30 per cent from a year earlier.
BNP Paribas embarked on a plan this year to cut €2 billion of costs by 2015. The French bank has “a rock-solid balance sheet, combining very high solvency and considerable liquidity reserves,” Mr Bonnafe said in the statement.
BNP Paribas’s leverage ratio - equity as a proportion of total assets - was 3.4 per cent at the end of June, above the 3 per cent threshold proposed by global regulators for the start of 2018, the bank said. BNP’s common equity Tier 1 ratio under fully-applied Basel III standards rose to 10.4 percent at the end of June from 10 per cent three months earlier.
The bank gained 12 per cent in Paris trading this year for a market value of €59.5 billion, the most among euro-region banks. Societe Generale, France’s second largest bank, which publishes earnings tomorrow, rose 7.6 per cent this year.
BNP Paribas plans to increase the workforce by 500 people across its businesses in Germany, where it employs about 3,500, to reach annual revenue of €1.5 billion by 2016, it said today.
Last week, BNP acquired for an undisclosed price a unit of Frankfurt-based Commerzbank that settles securities transactions and administers funds.
The French bank said in February it plans to hire about 1,300 people over three years at its corporate- and investment- banking and investment-solutions businesses in the Asia-Pacific region. The firm, which currently employs about 8,000 people in those activities in the region, foresees annual revenue growth of 12 per cent through 2016 in Asia.
Pretax profit at BNP’s French retail-banking unit fell 2.2 per cent to €536 million, the bank said. That beat the €479 million average estimate of five analysts. Pretax profit at its Belgian branch network fell 2.4 per cent to €161 million and pretax earnings at the Rome-based unit, BNL, fell 41 per cent to €75 million as the country faces its longest recession in at least two decades.
Pretax earnings at BNP Paribas’s corporate and investment bank fell 39 per cent to €497 million, missing analysts’ estimate of €688 million. BNP’s capital-markets revenues rose 4.1 per cent from a year earlier as its equity-and-advisory sales jumped 23 per cent “due in particular to the rise in transaction volumes and the good performance of structured products,” the bank said. Fixed-income trading revenue declined 4.3 per cent as “the rates business was affected by the considerable volatility at the end of the quarter,” BNP said.
JPMorgan Chase and Co, Goldman Sachs Group, Citigroup, Bank of America and Morgan Stanley reported a cumulative 24 per cent gain in revenue at their investment banks from the year-earlier quarter, excluding own debt valuations, according to data compiled by Bloomberg Industries.
President Francois Hollande’s government is prodding banks to lend more to help France emerge from a recession, while cutting them some slack on other fronts. French banks were spared a split of lucrative investment-banking activities as lawmakers passed a bill this month to segregate proprietary trading, the first such move in Europe.
Also, new French regulations are giving the lenders a liquidity boost of €30 billion by letting them keep additional client deposits in tax-free accounts on their balance sheets.
Loans at BNP’s French retail-banking unit declined 2.7 per cent in the quarter while lending to small- and medium-sized firms rose 1.8 per cent, the bank said. France’s three largest banks cumulatively shrank risk- weighted assets by €128 billion last year to comply with international capital and liquidity requirements, while also cutting thousands of investment-banking jobs.