BNP hits capital base target ahead of deadline

FRANCE’S BIGGEST listed bank, BNP Paribas, has hit a target to strengthen its capital base six months early, beating many European rivals as it strives to reassure investors worried about its exposure to the region’s sovereign debt crisis.

The news, which puts it well ahead of domestic competitor Société Générale and in the top tier of banks across Europe, came as BNP posted a smaller than expected fall in second-quarter profit, helped by tight cost control, asset sales and lower than feared provisions for loan losses.

European banks, including Deutsche Bank, UBS and SocGen, have posted dismal second-quarter results, hit by the euro zone’s debt problems and weak economy.

Many have also been selling assets, slashing jobs and cutting dividends to bolster their balance sheets and meet tougher regulations aimed at preventing a repeat of the 2008 financial crisis.

BNP said yesterday it had achieved a Tier 1 capital ratio of 8.9 per cent under Basel III rules at the end of June – some six months ahead of schedule.

By contrast, SocGen is eyeing a Basel III ratio of at least 9 per cent only by the end of next year.

Analysts said BNP had benefited from its strength in retail banking, cost-cutting and asset sales at acceptable prices.

“We are very confident for the second part of the year,” said BNP chief executive Jean-Laurent Bonnafe. “This quite positive positioning will allow the group to concentrate on mid-term issues.”

Analysts say areas of focus could be whether BNP decides to sell US retail subsidiary BancWest and its operational plans in Italy.

Asked if BNP was embroiled in the London Interbank Offered Rate (Libor) fixing scandal, which has engulfed more than a dozen rivals, Mr Bonnafe said it was “absolutely not” involved. He said regulators would have to change the way Libor was calculated.

Second-quarter net income at BNP fell 13.2 per cent to €1.85 billion while revenue declined 8 per cent to €10.10 billion.

The bank has also sought to boost deposits, which are a valuable source of funding in this unpredictable environment. Retail deposits in core French, Italian and Belgian markets grew 2.8 per cent, but it is unclear at what cost. – (Reuters)