BNP Paribas Quarterly Net Falls 45% on Trading Revenue

BNP Paribas SA, France’s largest bank, reported a smaller decline in first-quarter profit than analysts estimated, helped by French and Belgian consumer banking.

Net income fell to 1.58 billion euros ($2.06 billion) from 2.87 billion euros a year earlier, the Paris-based bank said in a statement today, beating the 1.34 billion-euro average estimate of 11 analysts surveyed by Bloomberg. Earnings last year were buoyed by the sale of a stake in Klepierre SA, Europe’s second-largest publicly traded mall operator.

Chief Executive Officer Jean-Laurent Bonnafe embarked this year on a plan to cut 2 billion euros of costs by 2015, while also expanding in Asian investment banking and asset management. The bank lowered operating expenses by 4.8 percent in the quarter from a year earlier, and booked 155 million euros of cost-cutting charges in the period.

“They’re swallowing the pill of the economic crisis in the least painful way,” said Jerome Forneris, who helps manage $8.5 billion at Banque Martin Maurel in Marseille and owns BNP shares. “Reigning in costs is allowing them to preserve profitability.”

BNP Paribas rose 1.2 percent to 43.40 euros by 11:27 a.m. in Paris trading, bringing the advance over the past 12 months to 49 percent and valuing the bank at about 54 billion euros. That compares with a 28 percent increase in the Bloomberg Europe Banks and Financial Services Index of 40 companies.

Consumer Banking

Revenue from BNP’s main European consumer-banking markets - -France, Belgium, Italy and Luxembourg -- fell 0.8 percent to 3.99 billion euros, while the bank shrank costs 1.4 percent to 2.43 billion euros, it said. Deposits from branch networks in the four markets rose a combined 6.1 percent over the past 12 months. Provisions for bad loans improved in Belgium, were stable in France and deteriorated in Italy, according to its website.

“Excluding Italy, across the board there is good discipline in the level of risk provisions,” said Jean-Pierre Lambert, a London-based analyst at Keefe, Bruyette & Woods Ltd.

Pretax earnings at the French branch network fell 2.2 percent to 582 million euros in the quarter, surpassing analysts’ 524 million-euro estimate. Revenue at the division fell 2 percent to 1.78 billion euros, the company said.

Belgium, Italy

In Belgium, where BNP Paribas’s consumer-banking unit is closing 150 branches and cutting 1,800 jobs by 2015 through “natural attrition,” pretax earnings rose 7.3 percent to 205 million euros, the bank said, topping analysts’ average estimate of 168 million euros.

Earnings at BNL, BNP’s Italian branch network, fell 43 percent to 84 million euros before tax, compared with analysts’ estimate of 79 million euros. BNP Paribas set aside 296 million euros for bad loans at the Italian unit, up 35 percent from a year earlier and almost one-third of the bank’s total provisions in the first quarter.

Pretax profit at BNP Paribas’s corporate and investment bank fell to 806 million euros from 1.16 billion euros a year earlier, missing analysts’ estimate of 877 million euros. Fixed-income revenue fell 27 percent, while equity and advisory sales dropped 20 percent, the bank said.

In corporate and investment banking “it was an in-between situation, European markets were not as strong as U.S. markets,” Bonnafe, 51, said in a Bloomberg Television interview.

Asia Expansion

BNP Paribas said in February it plans to hire about 1,300 people over three years at its corporate- and investment-banking and investment-solutions businesses in the Asia-Pacific region. The firm, which currently employs about 8,000 people in those activities in the region, foresees annual revenue growth of 12 percent through 2016 in Asia.

“We have all means to develop the company and to grow the business in geographies in which the economy is growing at a stronger pace,” Bonnafe said. BNP Paribas is “not considering acquisitions for the time being,” he said.

Pretax profit at the investment-solutions business, which includes asset management, private banking and insurance, rose 13 percent to 541 million euros, in line with analysts’ estimates. The asset-management business had outflows “in particular in money-market funds, but good asset inflows in emerging markets,” the bank said.

The wealth management unit at BNP Paribas attracted 6.3 billion euros of net new funds from clients in the first quarter, with “very strong asset inflows in Asia and in the domestic markets,” it said on its website.

Capital Levels

BNP Paribas’s core Tier 1 capital ratio under fully-implemented Basel III rules reached 10 percent on March 31, up from 9.9 percent at the end of December. The lender, like French competitors Societe Generale SA and Credit Agricole SA, bolstered capital and sold assets between 2011 and 2012 to meet regulators’ demands.

“BNP is in full transformation, but it’s taking place with capital levels that are far from being the worst,” Valerie Cazaban, a fund manager at Stratege Finance said in an interview before the results were published.

While they dodged the worst of the sovereign-debt crisis, in part because of the European Central Bank’s three-year loans, France’s three largest banks last year shrank risk-weighted assets by 128 billion euros and cut hundreds of investment-banking jobs.

Now French banks are counting the cost of the economic slump at home. The French economy has barely grown over the past two years and joblessness is at a record high. The total retail-banking revenue of the country’s five largest lenders -- including Groupe BPCE and Credit Mutuel-CIC -- last year declined for the first time in two decades and it will probably keep falling 1.2 percent annually through 2015, according to Munich-based Roland Berger Strategy Consultants.