BNP Paribas Follows Bank of Italy’s Call to Bolster Local FundsFabio Benedetti-Valentini and Sonia Sirletti
BNP Paribas SA, facing mounting bad-loan provisions at its Italian unit Banca Nazionale del Lavoro, wrote down the division’s goodwill following a Bank of Italy call to bolster capital locally.
BNP Paribas, France’s largest bank, took 298 million euros ($397 million) in fourth-quarter goodwill writedowns at Rome-based BNL “due to the expected increase in the Bank of Italy’s capital requirements,” it said today in a statement.
Italy’s central bank is requiring the company to boost the common equity Tier 1 capital ratio to 8 percent from 7 percent at BNL, which will comply by retaining profits, BNP Paribas said. The French bank had 1.4 billion euros of goodwill related to BNL on its balance sheet at the end of December, down from 1.7 billion euros a year earlier, according to its financial statements.
European Central Bank council member Ignazio Visco, who heads the Bank of Italy, said some Italian banks need more capital as the country’s recession drags on.
“Some large- and medium-sized groups still must make progress on the road to broadening their resources,” Visco said in a speech in Bergamo, Italy, on Feb. 9. Increasing capital “allows a reduction of financial leverage without cutting credit support to the real economy.”
Italian voters will go to polls on Feb. 24 and Feb. 25 for national elections as the economy, the euro-region’s third largest, remains mired in a fourth recession since 2001. Unemployment reached the highest level in 13 years in December and consumer confidence fell in January to the lowest since at least 1996 as Prime Minister Mario Monti’s policies to contain the budget deficit curbed domestic demand.
BNL had fourth-quarter pretax earnings of 68 million euros, down 42 percent from a year earlier and below analysts’ estimates for 91 million euros. BNP Paribas, which acquired BNL in 2006 for 9 billion euros, took 283 million euros in bad-loan provisions at the unit, a 39 percent increase from a year earlier.
The increase in BNL’s bad-loan provisions is “nothing dramatic,” BNP’s Chief Executive Officer Jean-Laurent Bonnafe told Bloomberg Television today. “BNL is to stay a profitable operation.”
BNP Paribas has also reduced its parent funding to BNL to below 7 billion euros, Bonnafe said today. The French bank, which is reimbursing three-year loans from the ECB’s Longer-Term Refinancing Operations, “kept the LTRO for BNL in Italy and that’s it,” Bonnafe told Bloomberg Television.
BNP Paribas plans no acquisitions to develop its Italian franchises and the French bank was “contacted by no one” regarding Banca Monte dei Paschi di Siena SpA, Bonnafe told reporters at a Paris press conference.