BNP Paribas Sees $983 Million Earnings Hit From BNL Goodwill

  • France's biggest bank sets aside more capital for Italian unit
  • Lender maintains plan to pay out 45% of profit in dividends

BNP Paribas SA wrote down the goodwill related to its Italian corporate and consumer banking unit, which will cut fourth-quarter earnings by about 900 million euros ($983 million).

France’s biggest bank is setting aside more capital for its BNL division, the lender said in a statement on Wednesday. The charge will have a positive effect on regulatory capital and the bank reiterated it plans to pay 45 percent of profit in dividends.

The European Central Bank set BNP Paribas’s minimum capital level, measured by the common equity Tier 1 ratio, at 10 percent for 2016, the lender said in the statement. The ratio stood at 10.7 percent at the end of September. BNP Paribas said it may boost the measure by 40 basis points as it explores alternatives for First Hawaiian Bank, including a possible sale or initial public offering.

BNP was down 0.7 percent in Paris trading at 53.31 euros as of 9:50 a.m. The stock has climbed about 8 percent this year, giving the company a market value of 66 billion euros.

The ECB’s appraisal of the bank is “significantly less benign than what we anticipated,” Federico Salerno, an analyst at MainFirst Bank AG, wrote in a note Thursday. “Despite its geographic and business diversification as well as a solid track record in risk controls, the bank has been imposed the highest required capital among listed French banks.”

The ECB recommends that BNP achieve a capital ratio of 11.5 percent by 2019, according to the statement. The bank may reach that level by mid-2017, depending on the outcome of its plans for the Hawaiian unit.

BNP Paribas, with consumer-banking businesses in France, Belgium and Italy, faces pressure on margins amid record-low interest rates. The firm is reorganizing its investment bank as higher capital demands cut into returns on some businesses.

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