Nov. 5 (Bloomberg) -- BNP Paribas SA, France's largest bank, had equity-derivatives losses that brought revenue at the securities unit to ``below zero'' last month, Chief Financial Officer Philippe Bordenave said.

The losses came in a ``period of extreme turbulence'' and ``unprecedented'' volatility, Bordenave said today on a call with analysts. They resulted from ``lots of different situations across the board'' and weren't related to Volkswagen AG, he said.

BNP Paribas dropped in Paris trading after reporting a 56 percent decline in third-quarter net income to 901 million euros ($1.17 billion), a bigger decline than analysts had estimated. Loan-loss provisions quadrupled following the collapse of Lehman Brothers Holdings Inc. and the worsening of European economies.

BNP Paribas has dodged the worst of the financial crisis, taking the opportunity to make acquisitions such as Fortis's operations in Belgium and Luxembourg. The French bank wasn't immune to the effects of Lehman's Sept. 15 bankruptcy, which froze credit markets and forced governments in the U.S. and Europe to aid banks to avert a financial catastrophe.

``The financial crisis had a strong impact on our books,'' Chief Executive Officer Baudouin Prot said in an interview with Bloomberg Television. ``At the investment bank we had slightly negative revenues for the first time in October. We'll gradually get back to a more normal activity.''

Hedging `Impossible'

The bank fell 90 cents, or 1.5 percent, to 57.60 euros. The stock has declined 22 percent this year, compared with a 52 percent slump in the 69-company Bloomberg Europe Banks and Financial Services Index. Societe Generale SA, France's No. 2 bank by market value, fell 48 percent.

The financial crisis cost BNP Paribas about 1.7 billion euros in provisions and asset writedowns in the third quarter, bringing the total so far to 4.26 billion euros. Like Paris-based Societe Generale, Prot, 57, decided not to use new accounting rules that are less stringent on markdowns.

Bordenave said that in October, ``the delta hedging became impossible'' for BNP Paribas's equity-derivatives traders. He declined to give the amount of the losses.

Jean-Pierre Lambert and John Holmes, London-based analysts at Keefe, Bruyette & Woods Ltd., estimated a ``a shortfall in fourth- quarter revenues of between 300 million euros and 500 million euros,'' they said in a note to investors today.

The securities unit, BNP Paribas's biggest by sales and profit in 2007, had revenues of 2.06 billion euros in the third quarter. It generated 492 million euros from equity and advisory, 876 million euros from fixed income and 690 million euros from the financing business, the bank said today.

Provisions, Writedowns

Fixed income had ``slightly positive'' revenue last month, while activity was ``stable'' at the financing unit, Bordenave said.

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

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.

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.

Not Immune

BNP Paribas plans to hold staffing levels at the unit steady, cutting back in certain business lines depending on the outlook and hiring in Asia and the Middle East, Bordenave said.

Banks worldwide have reported about $690 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.

Prot told reported in Paris today that actions by governments and central banks have stopped the systemic risk that threatened the financial system. Still, markets remain ``far from normal,'' and BNP Paribas won't be immune to deteriorating economic conditions, he said. He predicted a ``gradual, slow improvement'' from the financial crisis.

``The economic crisis will have an impact on everyone'' in the banking industry, Prot told reporters in Paris. Still, BNP Paribas will probably have lower provisions than rivals because it is ``rigorous in the quality of risk,'' he said.

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

Fortis Purchase

BNP Paribas was one of the first banks publicly caught up in the credit market seizure in August 2007 when it temporarily froze three funds because it couldn't find prices for some of the securities they were holding.

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.

Pretax earnings at the French retail network rose 5.5 percent to 385 million euros, matching analysts' estimates. Revenue rose 1.5 percent. Prot said in May that revenue at the French branches would probably increase 3 percent this year, and on Aug. 6 he reiterated that sales growth will be ``as close as possible'' to that level in the second half.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net.

Last Updated: November 5, 2008 11:50 EST