BNP Paribas Third-Quarter Net Doubles on Trading Gains

BNP Paribas SA (BNP), France’s largest bank, said third-quarter profit more than doubled after it posted higher revenue at the investment-banking unit.

The shares rose after the Paris-based company reported net income climbed to 1.32 billion euros ($1.7 billion) from 541 million euros a year earlier. That exceeded the 1.06 billion- euro average estimate of eight analysts surveyed by Bloomberg.

BNP Paribas, led by Chief Executive Officer Jean-Laurent Bonnafe, has reached higher capital levels under new Basel III rules than rivals including Germany’s Deutsche Bank AG (DBK) as European lenders cut assets and reduce corporate- and investment-banking jobs. The French firm, among banks hurt last year by a liquidity crunch and losses on Greek sovereign debt, plans to expand services to affluent U.S. clients and to corporate- and investment-banking clients in Asia.

“We are well positioned to redevelop and benefit from geographies or businesses that are growing,” Bonnafe, 51, said in an interview with Bloomberg Television.

BNP Paribas rose 4 percent to 40.69 euros at 9:05 a.m. in Paris trading, the biggest gain in three weeks. That gives the company a market value of 51 billion euros.

Pretax profit at BNP Paribas’s corporate- and investment- banking unit, or CIB, rose 7.3 percent to 732 million euros, beating analysts’ estimate of 686 million euros. Revenue from equity and advisory operations climbed 51 percent to 444 million euros, while fixed-income sales more than doubled to 1.13 billion euros.

“We saw quite a strong rebound” in capital-markets revenue, Bonnafe said. “We rely very much on the global trend of market businesses of course, but for the time being there is no reason to believe it’s going to be that different.”

Greek Writedown

The bank, which took 3.2 billion euros in writedowns on Greek government debt in 2011, has rushed to cut its sovereign debt holdings in most European countries since mid-2011 to help protect capital levels.

BNP Paribas was among three French lenders whose credit rating was cut by Standard & Poor’s last month on concern it may be hurt by Europe’s protracted economic weakness and a potential housing slump in France. BNP Paribas, Cofidis and Banque Solfea were downgraded by S&P as “these groups are more vulnerable to the impact of rising economic risks in the euro zone, particularly in France and countries in southern Europe,” the ratings company said on Oct. 26.

French banks also face “potentially limited, but still noteworthy, impact from an ongoing correction in the housing market,” S&P said last month. The ratings company revised its outlook to negative from stable for BNP Paribas and 10 other French lenders, including Societe Generale SA (GLE) and Credit Agricole SA (ACA), France’s second and third largest by market value, respectively.

Funding Stabilizing

S&P’s move came as France’s largest banks have found their funding situation stabilizing, thanks to 1 trillion euros in long-term loans by the European Central Bank and ECB President Mario Draghi’s agreement in September to buy the bonds, under some conditions, of euro nations whose sovereign yields have soared.

“The French real-estate market is very, very solid, I can tell you,” Bonnafe said. “Europe as a whole has been slowing down, so this is just the same for France.”

French banks, the biggest foreign holders of private and public debt in the euro-area’s problem economies, are benefiting from the ECB’s moves as the crisis enters its fourth year.

BNP Paribas has gained 34 percent this year in Paris trading, while Societe Generale has risen 51 percent in 2012. Credit Agricole has increased about 41 percent.

Asset Disposals

Both BNP Paribas and Credit Agricole operate Italian branch networks. French banks held $540 billion in private and public debt in Greece, Ireland, Italy, Portugal and Spain at the end of June, Bank for International Settlements data show.

BNP Paribas last year joined Societe Generale and Credit Agricole in shrinking balance sheets and slashing sovereign debt holdings. The lender has boosted its capital level with retained earnings and asset disposals.

The company began trimming its balance sheet last year as capital requirements and funding costs increased. The bank at the end of September reached a target of 45 billion euros in risk-weighted asset cuts at the CIB division. The French firm also has achieved 90 percent of its planned job reductions at the unit.

Consumer Banking

“There is absolutely no plan to go further in deleveraging,” Bonnafe said. BNP Paribas’s core Tier 1 ratio under Basel III reached 9.5 percent at the end of September, exceeding the bank’s goal.

Securities firms in the U.S. and Europe have posted gains in revenue since Draghi’s July pledge to defend the euro with “whatever it takes” sparked a rally in bond markets. Deutsche Bank last week posted an increase in third-quarter profit as revenue from trading bonds and other products jumped 67 percent. Goldman Sachs Group Inc. (GS) last month said its fixed-income, currencies and commodities revenue climbed 28 percent in the third quarter from a year earlier.

BNP’s total retail-banking pretax profit was 1.71 billion euros in the third quarter, 8.8 percent higher than last year, the bank said. Earnings at the French branch network rose to 525 million euros from 487 million euros a year earlier and Belgian consumer-banking pretax profit gained 8.5 percent to 192 million euros.

The lender’s Italian retail-banking network, Banca Nazionale del Lavoro, had third-quarter pretax earnings of 141 million euros, down 6.6 percent from a year earlier, beating analysts’ estimates for 109 million euros.

BNP Paribas sees “no question, no issue” with its parent funding to Rome-based BNL, Bonnafe said. The company’s funding to BNL will “obviously” fall to below 10 billion euros by year’s end, he 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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