Nov. 21 (Bloomberg) -- BNP Paribas SA, Europe's third- biggest bank, may cut bonuses by more than 70 percent at its corporate and investment bank after profit plunged in the first three quarters of the year.

Most employees will have their bonuses reduced, more people than in the past will receive no bonus at all, and even the ``best performers may be affected,'' Jacques d'Estais, the Paris- based head of corporate and investment banking, wrote in a Nov. 13 internal memo obtained by Bloomberg News.

``I am therefore asking you to start managing your teams' bonus expectations now,'' d'Estais wrote to senior managers, citing an almost 73 percent drop in pretax profit in the first nine months of 2008. ``Our overall bonus pool is therefore likely to show the same YoY decrease.''

BNP Paribas set aside 577 million euros ($723 million) in the third quarter related to the bankruptcy of Lehman Brothers Holdings Inc., once the biggest underwriter of mortgage bonds. The French bank's securities unit had revenue ``below zero'' for the first time in October because of equity derivatives losses, the company said this month.

Pascal Henisse, a spokesman for BNP Paribas, declined to comment on the memo when reached by phone.

Who Gets What?

``2008 will be an exceptionally challenging year for compensation on several fronts,'' said Sonia de Demandolx, a recruiter at the executive search firm Russell Reynolds Associates in Paris. ``There will be an enormous polarization between who gets what, meaning top rainmakers seeing a slight decrease of their bonus, the second tier down 50 percent and the rest falling 80 to 100 percent.''

Corporate and investment bankers who weren't among top revenue generators probably earned bonuses of at least $1 million last year, more experienced people got $2 million to $5 million, and the top bankers earned even more, two investment banking recruiters said.

Banks in Europe and the U.S. are scaling back variable compensation. London-based Barclays Plc on Nov. 18 said it won't pay annual bonuses to top executives including Chief Executive Officer John Varley and investment banking chief Robert Diamond, as it asks investors for 7 billion pounds ($10.5 billion) to shore up capital.

Gaining Market Share

At New York-based Goldman Sachs Group Inc., CEO Lloyd Blankfein and six deputies will forgo bonuses, while Zurich-based UBS AG scrapped bonuses for CEO Marcel Rohner and 11 other top executives.

BNP Paribas said on Nov. 19 that its current capital ratios were in line with regulatory requirements and it didn't need to raise more funds, after what it termed ``speculative'' rumors that the bank might be planning to raise capital.

BNP Paribas fell 52 cents, or 1.4 percent, to 35.98 euros in Paris trading. The stock has fallen 23 percent this week and is down 52 percent this year.

The securities unit is nevertheless gaining market share, d'Estais wrote in the memo, and he noted that the division stayed profitable in the third quarter, ``just above breakeven.''

The unit has been profitable every quarter since Banque Nationale de Paris SA took over Paribas SA for 11.5 billion euros in 1999. It has a staff of 15,785 in 53 countries, according to the bank's Web site. Last year the corporate and investment bank accounted for 27 percent of BNP Paribas's revenue and 32 percent of its pretax profit.

Banks and brokerages worldwide have announced $708 billion of writedowns and credit losses since the subprime-mortgage market collapsed last year, and have cut almost 161,000 jobs, data compiled by Bloomberg show.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net; Jacqueline Simmons at jackiem@bloomberg.net; Alan Katz in Paris at 5007 or akatz5@bloomberg.net

Last Updated: November 21, 2008 11:50 EST