BNP Paribas profit dips 42% on writedowns

BNP Paribas SA, France's largest bank, reported a 42 percent decline in fourth-quarter profit after writing down the value of securities hurt by worsening credit markets.

Net income fell to 1.01 billion euros from 1.72 billion euros a year earlier, the Paris-based bank said yesterday. The result matches the estimated earnings BNP Paribas released on Jan 30.

BNP Paribas took 589 million euros of writedowns on loans to finance leveraged buyouts and debt backed by bond insurers, and set aside an additional 309 million euros linked to US loans and securities. The bank's costs related to the US subprime crash were dwarfed by the $14 billion of markdowns reported last month by UBS AG, Europe's largest bank, and were less than those of French rivals Societe Generale SA and Credit Agricole SA.

"This shows the bank's strategy allows it to make it through a crisis," said Benoit de Broissia, who helps oversee $5.9 billion at Richelieu Finance in Paris and holds BNP Paribas. "It came out better than its French and European counterparts."

BNP Paribas rose 78 cents, or 1.3 percent, to 60.77 euros by 10:35 am in Paris trading, valuing the company at 55 billion euros. The stock is down 18 percent this year, compared with a 16 percent decline in the 60-member Bloomberg Europe Banks and Financial Services Index.

Record annual profit

Rising US subprime mortgage defaults led to more than $145 billion in writedowns and loan losses at the world's biggest financial companies. The banks may be facing as much as $203 billion in additional writedowns, largely because of a worsening bond insurance crisis, UBS analyst Philip Finch said last week.

BNP Paribas' full-year profit rose 7 percent to 7.8 billion euros, a record for a French bank. The bank's goal is to double revenue in emerging economies in three years to reach 15 percent of the group's total. It plans to focus on Eastern Europe, the Mediterranean basin, Brazil, India and China.

The French company was one of the first banks publicly caught up in the credit market seizure in August when it froze three funds, saying it could no longer find prices for some of the securities they held. The funds later reopened.

BNP Paribas said its corporate and investment bank was profitable in every quarter of the year, making a pretax profit of 3.6 billion euros, down 9 percent from the previous year. Pretax profit at the division fell 65 percent to 343 million euros in the fourth quarter.

In the second half, when credit markets seized up, the securities unit earned 1.14 billion euros before tax, an amount exceeded only by US investment banks Goldman Sachs Group Inc and Lehman Brothers Holdings Inc, according to figures from BNP.

"In 2008, I am confident that BNP Paribas should be able to outperform again," Chief Executive Officer Baudouin Prot said.

Agencies

(China Daily 02/21/2008 page16)