BNP Paribas Climbs to Two-Year High on Leverage, Capital Ratios

BNP Paribas SA (BNP), France’s largest bank, reached a two-year high in Paris trading after saying it complies with international standards on leverage and doesn’t plan further asset reductions.

The bank climbed as much as 2 percent to 48.81 euros, its highest since July 22, 2011, and closed up 1.6 percent at 48.64 euros. The stock has gained 14 percent this year, valuing the company at 60.5 billion euros ($80 billion), the highest among banks in continental Europe.

“They appear to have done a pretty good job,” said Julian Chillingworth, who helps manage 20 billion pounds ($30.4 billion) at Rathbone Brothers Plc in London and holds BNP Paribas shares. “You would expect the stock price to reflect that.”

BNP Paribas’s leverage ratio -- the proportion of its common equity to total assets -- was 3.4 percent under fully-applied Basel III rules, above the 3 percent level proposed by global regulators for the start of 2018, the bank said today. BNP Paribas said it’s finished shrinking assets a day after Deutsche Bank AG of Frankfurt and Barclays Plc pledged to further reduce their balance sheets.

“Deleveraging has been done,” Jean-Laurent Bonnafe, BNP Paribas’s chief executive officer, told journalists in Paris, ruling out any new asset-cutting program. The French bank first reduced its balance sheet following the purchase of Fortis units in 2009, and made further cuts over the past two years, mostly by shrinking risk-weighted assets at the corporate and investment bank, said Bonnafe, 52.

Capital Accumulation

BNP Paribas’s assets amounted to about 1.86 trillion euros at the end of June, down from 2.24 trillion euros three years earlier, figures from the Paris-based company show.

The bank doesn’t need “anything else” to boost solvency as “the normal accumulation of capital will keep improving things progressively,” Chief Operating Officer Philippe Bordenave said in a Bloomberg Television interview.

BNP’s common equity Tier 1 capital ratio under Basel III standards rose to 10.4 percent of assets weighted according to risk at the end of June from 10 percent three months earlier, the bank said.

Deutsche Bank, Germany’s largest bank, said yesterday it will shrink its balance sheet by 250 billion euros, joining London-based Barclays in seeking to comply with stricter capital and leverage rules.

Barclays, Deutsche

Deutsche Bank’s common equity Tier 1 capital accounted for 2.3 percent of its adjusted balance sheet under European leverage standards, according to Bloomberg calculations based on figures the Frankfurt-based bank published yesterday.

Barclays, (BARC) the No. 2 U.K. bank by assets, said yesterday it will reduce leverage by raising 5.8 billion pounds in a rights offer, cutting as much as 80 billion pounds of assets and selling 2 billion pounds of loss-absorbing securities.

Regulators are increasingly questioning the risk weightings banks apply to their assets, which are typically set by the lenders’ own models, and calling for inclusion of the broader measure of equity to total assets that ignores risk.

The Basel Committee on Banking Supervision, which sets global banking standards, is taking a closer look at risk weightings after finding wide variations in a study of 32 lenders, Stefan Ingves, the group’s chairman, said this month.

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;

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