BNP Paribas third-quarter profit slides 72% on Greek write-down

Updated: 2011-11-04 07:58

(China Daily)

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BNP Paribas third-quarter profit slides 72% on Greek write-down
BNP Paribas is booking losses as it reduces its European sovereign-debt holdings to help make its capital level less dependent on fluctuations in government debt prices. [Chris Ratcliffe / Bloomberg]

PARIS - BNP Paribas SA, France's largest bank, said third-quarter profit fell 72 percent because of a write-down on Greek sovereign debt and losses from selling European government bonds.

Net income declined to 541 million euros ($741 million) from 1.91 billion euros a year earlier, the Paris-based company said in an e-mailed statement on Thursday.

That missed the 1.24-billion-euro average estimate of 13 analysts surveyed by Bloomberg. The bank took a 2.26-billion-euro pretax write-down on Greek sovereign debt in the period.

"The new plan of Greek debt restructuring weighed on the results," Chief Executive Officer Baudouin Prot said in the statement. Still, the company "is profitable and is keeping its solvency ratio at a high level", he said.

BNP Paribas said on Thursday it expects about 1.2 billion euros in losses from disposals and one-time costs as it speeds up asset cuts to comply with new capital rules.

The bank, along with smaller French rival Societe Generale SA, is racing to shrink its balance sheet after the company's stock plunged and US money-market funds became reluctant to lend to it in dollars, making it harder to refinance international businesses.

The two lenders announced in September steps leading to trim a combined 300 billion euros of holdings by 2013. BNP Paribas has pledged to reduce its balance sheet by 10 percent, including cutting $82 billion in corporate- and investment- banking assets.

Booking losses

EU leaders plan to solve the debt turmoil hit a bump this week when Greece's government called a referendum on its latest bailout package, spurring concern that the country may default.

EU leaders agreed on Oct 27 to bolster the region's rescue fund, recapitalize banks and convince investors to cut Greece's debt load to prevent contagion effects to Italy and Spain. Policymakers and bankers converged on a 50 percent write-down for Greece's lenders.

European leaders on Wednesday cut off aid payments to Greece and said a referendum in five weeks will determine whether the debt-strapped nation becomes the first to exit the 17-country eurozone.

Asset cuts

BNP Paribas is booking losses as it reduces its European sovereign-debt holdings, including Spanish and Italian sovereign debt, to help make its capital level less dependent from fluctuations in government debt prices.

BNP Paribas posted 362 million euros of losses in the third quarter and about 450 million euros in October stemming on government bond sales, the bank said.

The company identified asset cuts that will represent a 750-million-euro reduction in gross operating income, or profit before provisions, it said.

BNP Paribas will be able to absorb more losses from its holdings of Greek sovereign debt, Prot said.

"We can certainly withstand another hit," he said in a Bloomberg Television interview in Paris. "I hope this country will enact the agreement," he said, referring to a new support package agreed on last week by EU leaders.


"BNP Paribas remains hostage to the euro periphery," Keefe, Bruyette & Woods Ltd analyst Jean-Pierre Lambert said in a note to investors on Tuesday. "Other key issues for investors remain access to funding and the earnings impact of deleveraging."

BNP Paribas, the largest foreign holder of Italian sovereign debt, reduced by 8.3 billion euros its banking-book holdings of debt from the eurozone's third-largest economy between the end of June and the end of October, the bank said on Thursday.

The French company cut its total sovereign debt portfolio by 23 percent to 81.5 billion euros at the end of October.

BNP Paribas wrote down its Greek sovereign debt holdings by 60 percent at the end of September. The bank also booked a 786 million-euro pretax gain on its own debt in the period and a 299-million-euro write-down on its stake in insurer Axa SA.

BNP Paribas' pretax profit at the corporate- and investment-banking division fell 50 percent to 641 million euros, less than the analysts' average estimate of 833 million euros.

Sales at the unit fell 40 percent to 1.75 billion euros as fixed-income revenue slid 63 percent, hurt by disposals of sovereign debt holdings, while equity-and-advisory sales plunged 44 percent.

Bloomberg News