BNP Paribas SA, France’s largest bank, said first-quarter profit rose 5.2 percent, exceeding analysts’ estimates, helped by the purchase of the rest of its Fortis unit in Belgium.
Net income increased to 1.67 billion euros ($2.31 billion) from 1.59 billion euros a year earlier, the Paris-based bank said in a statement today. Earnings beat the 1.44 billion-euro average estimate of eight analysts surveyed by Bloomberg.
“BNP Paribas achieved solid results this quarter in a still sluggish economic environment in Europe,” Chief Executive Officer Jean-Laurent Bonnafe, 52, said in the statement.
Earnings were boosted by a 156 million-euro drop in payments to minority shareholders after BNP Paribas bought out Belgium’s 25 percent stake in its Fortis unit for 3.25 billion euros. The French bank also announced last month a series of targets for 2016, including goals for increasing revenue and profitability as the European economy recovers.
BNP Paribas rose 1.5 percent to 55.90 euros yesterday in Paris trading, paring this year’s decline to 1.3 percent. Societe Generale SA, the second-largest French bank by market value, climbed 6.8 percent this year, and Credit Agricole SA, the third-biggest, surged 23 percent.
BNP Paribas posted its smallest profit since 2008 in the fourth quarter after setting aside $1.1 billion tied to a review of payments to parties subject to U.S. economic sanctions. It said today that talks took place on the matter during the first quarter. While there is uncertainty on the size of the penalty the bank will face, it “can’t be excluded” that it could be significantly larger than the amount provisioned, BNP said.
Pretax profit at BNP’s corporate and investment bank, home of trading and corporate finance, fell 24 percent to 623 million euros from a year earlier, below the 681 million-euro average estimate of five analysts. Fixed-income revenue dropped 22 percent, while equities and advisory revenue jumped 50 percent.
BNP follows competitors including Frankfurt-based Deutsche Bank AG, Credit Suisse Group AG of Zurich and New York-based JPMorgan Chase & Co. in reporting a slowdown in debt trading.
“The fixed-income part remains under pressure currently,” Karim Bertoni, who helps manage $3.3 billion at de Pury Pictet Turrettini & Co. in Geneva, said in a phone interview before the publication of results. “But other elements like a progressive drop in provisions may help improve European big banks’ results over the rest of the year.”
BNP Paribas aims to capture a higher portion of the global demand from investors and corporations for fixed-income products through 2016 in markets such as Asia, Germany and North America, it said last month. The French bank has also taken steps to reinforce its equity-derivatives business.
Consumer banking pretax earnings fell 15 percent to 1.3 billion euros in the first quarter. Pretax profit at its French branch network fell 5.8 percent to 486 million euros, while earnings in its Belgian unit fell to 171 million euros in the first quarter from 189 million euros a year earlier, it said.
Pretax earnings at BNP’s Rome-based unit, Banca Nazionale del Lavoro, declined 80 percent to 16 million euros as loan-loss provisions increased, BNP said. Italy is exiting its longest recession on record and BNP Paribas has said it expects loan-loss provisions at its Italian unit to fall in 2015-2016.
BNP Paribas targets a return on equity, a key measure of profitability, of at least 10 percent by 2016 from 7.7 percent last year, and aims to pay dividends amounting to about 45 percent of earnings.
Pretax profit at BNP’s investment-solutions unit, which includes asset management, private banking and insurance, rose 1.5 percent to 545 million euros, it said.
BNP Paribas set aside 100 million euros in doubtful-loan provisions because of the “exceptional situation” in Ukraine and Russia, the bank said. The French bank also had a 64 million-euro accounting charge tied to a reevaluation of its own debt, and booked 301 million euros in gains from selling securities, BNP said.