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BNP Paribas' earnings slump
By Greg Keller |
May 7, 2009, Thursday
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Print Edition
Print Edition
FRENCH bank BNP Paribas said yesterday its net profit slumped 21 percent in the first quarter as its retail banking activities in the United States were hammered amid the global economic downturn.
Paris-based BNP Paribas, the euro zone's largest bank by deposits, said net profit fell to1.56 billion euros (US$2.08 billion) in the first quarter from 1.98 billion euros a year earlier.
Earnings slumped on higher loan losses and market turmoil despite a 28 percent increase in revenue, driven by the investment banking division's record-high income.
"The crisis is ongoing, and it's going to continue for a long time," BNP Paribas Chief Executive Baudoin Prot said at a press conference. "We are far from a return to calm on the markets."
BNP Paribas' retail banking businesses outside of its main French and Italian markets were among its hardest hit divisions in the quarter, especially its US retail bank BancWest, which had a pre-tax loss of 29 million euros in the quarter compared to a profit of 151 million euros a year earlier.
Prot blamed the skyrocketing cost of risk in the quarter compared to a year earlier for the bank's profit slump. This was mainly a problem for the bank in the United States and Ukraine, as the economic downturn caused rising delinquency rates on some of the bank's loan portfolios, Prot said.
The bank, whose shares have risen nearly 40 percent so far this year, said it has launched a 100-million-euro cost-cutting program at San Francisco-based BancWest after operating expenses rose 3.3 percent in the quarter.
In a statement, the French bank blamed the "continued deterioration of the economy and strong persisting turbulence in financial markets" for the first quarter performance.
Last week BNP Paribas completed its acquisition of Belgium's largest bank in a deal that makes it the largest bank in the euro zone by deposits.
BNP Paribas will take a 75 percent stake in Fortis Bank for 2.9 billion euros in stock, with the Belgian government keeping the rest.
Difficult year
Prot said an "industrial plan" for Fortis Bank will be completed by the fall, and that 2009 would "be another difficult year" for the bank.
Fortis ran into trouble during the financial panic last fall as investors doubted it could both handle investments losses and repay the massive debt it incurred in buying parts of ABN Amro of the Netherlands.
Facing a run by depositors, Fortis struck a deal with the Dutch, Belgian and Luxembourg governments to save it from bankruptcy. The governments carved it up along national lines.
BNP Paribas' investment banking arm, the biggest and most profitable division in the quarter, posted a massive jump in revenue thanks to what the bank deemed "unprecedented volumes" in its fixed-income business.
Investment banking revenue nearly tripled to 3.7 billion euros from 1.3 billion euros a year earlier, which forced the bank to provision so much for bankers' bonuses that operating costs for the division nearly doubled.
Prot noted, however, that these bonuses would depend on the bank's performance over the coming three quarters and that the bank's bonus practices "fully complied" with both French and international regulations.
Large bonuses at banks and other companies seeking government bailouts have been a focus of frustration by taxpayers in many countries.
Paris-based BNP Paribas, the euro zone's largest bank by deposits, said net profit fell to1.56 billion euros (US$2.08 billion) in the first quarter from 1.98 billion euros a year earlier.
Earnings slumped on higher loan losses and market turmoil despite a 28 percent increase in revenue, driven by the investment banking division's record-high income.
"The crisis is ongoing, and it's going to continue for a long time," BNP Paribas Chief Executive Baudoin Prot said at a press conference. "We are far from a return to calm on the markets."
BNP Paribas' retail banking businesses outside of its main French and Italian markets were among its hardest hit divisions in the quarter, especially its US retail bank BancWest, which had a pre-tax loss of 29 million euros in the quarter compared to a profit of 151 million euros a year earlier.
Prot blamed the skyrocketing cost of risk in the quarter compared to a year earlier for the bank's profit slump. This was mainly a problem for the bank in the United States and Ukraine, as the economic downturn caused rising delinquency rates on some of the bank's loan portfolios, Prot said.
The bank, whose shares have risen nearly 40 percent so far this year, said it has launched a 100-million-euro cost-cutting program at San Francisco-based BancWest after operating expenses rose 3.3 percent in the quarter.
In a statement, the French bank blamed the "continued deterioration of the economy and strong persisting turbulence in financial markets" for the first quarter performance.
Last week BNP Paribas completed its acquisition of Belgium's largest bank in a deal that makes it the largest bank in the euro zone by deposits.
BNP Paribas will take a 75 percent stake in Fortis Bank for 2.9 billion euros in stock, with the Belgian government keeping the rest.
Difficult year
Prot said an "industrial plan" for Fortis Bank will be completed by the fall, and that 2009 would "be another difficult year" for the bank.
Fortis ran into trouble during the financial panic last fall as investors doubted it could both handle investments losses and repay the massive debt it incurred in buying parts of ABN Amro of the Netherlands.
Facing a run by depositors, Fortis struck a deal with the Dutch, Belgian and Luxembourg governments to save it from bankruptcy. The governments carved it up along national lines.
BNP Paribas' investment banking arm, the biggest and most profitable division in the quarter, posted a massive jump in revenue thanks to what the bank deemed "unprecedented volumes" in its fixed-income business.
Investment banking revenue nearly tripled to 3.7 billion euros from 1.3 billion euros a year earlier, which forced the bank to provision so much for bankers' bonuses that operating costs for the division nearly doubled.
Prot noted, however, that these bonuses would depend on the bank's performance over the coming three quarters and that the bank's bonus practices "fully complied" with both French and international regulations.
Large bonuses at banks and other companies seeking government bailouts have been a focus of frustration by taxpayers in many countries.
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