BNP Paribas Profit Gains 1.1% as Consumer Banking Cushions Greek Debt Loss

BNP Paribas (BNP) SA, Europe’s largest lender by assets, said second-quarter profit advanced 1.1 percent as higher consumer-banking earnings helped cushion a loss on its Greek government-debt holdings.

Net income rose to 2.13 billion euros ($3.04 billion) from 2.11 billion euros a year earlier, the Paris-based bank said in a statement today. The average estimate of 13 analysts surveyed by Bloomberg was for profit of 2.06 billion euros. The company took a 534 million-euro writedown on its Greek sovereign debt.

“This is exactly the conservative and sound provisioning that you would expect BNP Paribas to provide for,” Chief Executive Officer Baudouin Prot, 60, said in an interview with Bloomberg Television. “Everyone who bets against Greece or against the euro zone, I hope that they lose.”

BNP Paribas joins Credit Agricole SA (ACA) and Germany’s Deutsche Bank AG (DBK) in writing down holdings of Greek government debt after signing the Institute of International Finance’s rescue plan last month. It requires investors to take a 21 percent loss on holdings that mature by 2020. Credit Agricole, France’s second- largest bank by assets, said last week the support plan for Greece will cost it about 150 million euros.

Photographer: Antoine Antoniol/Bloomberg

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Photographer: Antoine Antoniol/Bloomberg

BNP Paribas joins Credit Agricole SA and Germany’s Deutsche Bank AG in writing down holdings of Greek government.

BNP Paribas was little changed at 43.67 euros by 11:27 a.m. in Paris trading. The shares have dropped 8.5 percent this year, giving the company a market value of 52.6 billion euros.

Retail Banking Surges

BNP Paribas gets most of its revenue from France, Belgium, Luxembourg and Italy and the company also owns BancWest, a network of branches in the U.S. Through its purchase of Fortis in 2009, the lender also added clients in faster-growing economies such as Turkey and Poland.

Pretax profit at the consumer-banking business climbed 27 percent to 1.55 billion euros, helped by earnings at the French retail-banking network, which rose 11 percent to 536 million euros. Profit before tax at BancWest increased to 177 million euros from 153 million euros a year earlier, the company said.

Provisions for doubtful loans in the second quarter increased to 1.35 billion euros from 1.08 billion euros a year earlier, hurt by the provision on Greek sovereign debt maturing before the end of 2020, the bank said. Excluding the Greek loss, provisions fell.

“We should have a continuation of a slight decrease in cost of risk in the next quarters,” Prot told reporters in Paris today. The provisions level at the Italian consumer- banking unit will probably continue “a gradual and moderate decline,” he said. BNP Paribas expects to keep recording provision reversals at its corporate- and investment-banking unit in the coming quarters, the CEO said.

‘Considerable Volatility’

Pretax profit at the corporate- and investment-banking division climbed 2.4 percent to 1.33 billion euros, higher than analysts’ average estimate of 1.31 billion euros. Revenue at the unit rose 5.7 percent as equity-and-advisory sales more than doubled, helping mitigate a 12 percent decline in fixed-income revenue that was hurt by “considerable volatility in the debt and credit markets,” the company said.

“The retail bank’s base is very solid and the CIB didn’t sink as others did,” said Alex Koagne, a Paris-based analyst at Natixis SA who has a “buy” rating on the stock.

Deutsche Bank said last week its corporate banking and securities unit had a 26 percent increase in pretax profit in the second quarter. Earnings at the investment-bank divisions at UBS AG, the biggest Swiss lender, and Credit Suisse Group AG, the second largest, both tumbled 71 percent in the period as Europe’s sovereign-debt crisis reduced revenue.

No Staff Reductions

Prot said the bank has no plans for cutting staff at the investment-banking unit and that there’s “no reason to make any brutal adjustments” in the division’s cost structure.

“It isn’t at all our intention to make reductions in Asia or anywhere else,” the CEO said.

Barclays Plc (BARC), Britain’s second-largest bank by assets, said today it will eliminate 3,000 jobs this year as investment banking pretax profit fell 27 percent. The London-based bank has cut 700 posts at Barclays Capital and 500 at its U.K. consumer- banking unit this year.

BNP Paribas, like New York-based JPMorgan Chase & Co., took advantage of competitors’ woes to make takeovers during the financial crisis, swelling its balance sheet. The bank became the biggest lender by deposits in the euro region with the purchase of Fortis’s assets in Belgium and Luxembourg.

BNL Provisions

BNP Paribas’s Italian retail network, Banca Nazionale del Lavoro SpA, had 129 million euros in pretax profit, up 25 percent from a year earlier, the company said. The Europe- Mediterranean division, which includes consumer-banking networks in countries such as Turkey, Ukraine and Egypt, had a 40 million-euro pretax profit, compared with 20 million euros a year earlier, BNP Paribas said.

Pretax earnings at the investment-solutions unit, which includes asset management, private banking and insurance, rose 16 percent to 549 million euros.

BNP Paribas can comply with new Basel III capital rules without selling new shares, Prot said.

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

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net.

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