BNP Paribas Profit Advances 15% on Retail Banking

BNP Paribas SA, Europe’s largest bank, said first-quarter profit rose 15 percent, helped by its French and U.S. consumer-banking businesses.

Net income advanced to 2.62 billion euros ($3.9 billion) from 2.28 billion euros a year earlier, the Paris-based company said in an e-mailed statement today. That beat the 2.22 billion- euro average estimate of 10 analysts surveyed by Bloomberg.

“All three key divisions -- retail, investment solutions and CIB -- contributed strongly” to the results, Chief Executive Officer Baudouin Prot said in a Bloomberg Television interview.

BNP Paribas, like New York-based JPMorgan & Chase Co., took advantage of competitors’ woes to make takeovers during the financial crisis, swelling its balance sheet. The bank became the biggest lender by deposits in the euro region with the purchase of Fortis’s assets in Belgium and Luxembourg in 2009.

BNP Paribas (BNP) gained 1.3 euros, or 2.4 percent, to 54.75 euros at 9:02 a.m. in Paris trading. The stock has risen 15 percent this year, compared with a 2.9 percent increase in the 48-company Bloomberg Europe Banks and Financial Services Index.

BNP Paribas’s total retail-banking earnings rose 25 percent in the first quarter, more than offsetting lower earnings at the corporate- and investment-banking unit, which fell 4.6 percent to 1.64 billion euros. That beat analysts’ estimates for earnings of 1.47 billion euros.

Revenue from the capital-markets and advisory businesses slumped 15 percent on lower fixed-income sales. Income from financing gained 6.8 percent to 1.14 billion euros as the energy and commodity business was “strong” amid high prices, the bank said.

UBS AG (UBSN) and Credit Suisse Group AG, Switzerland’s largest banks, as well as London-based Barclays Plc last week posted lower profits as investment-banking earnings tumbled on declines in fixed-income revenue. Barclays Capital, the investment- banking unit, reported a 15 percent drop in revenue in the quarter, while pretax profit fell by a third. Credit Suisse’s investment bank recorded a 25 percent decrease in pretax earnings as income dropped and costs rose.

Both London-based Barclays, run by Robert Diamond, and Credit Suisse of Zurich, led by Brady Dougan, lowered their profitability goals in February as regulators told banks to hold more reserves in the wake of the financial crisis. Prot said in February that BNP Paribas will stick with its target for a return on equity of 15 percent, a profitability goal he described as challenging given tougher regulatory requirements.

BNP Paribas’s return-on-equity ratio reached 15.1 percent in the first quarter, up 0.7 percentage point from a year earlier, the bank said.

Provisions for doubtful loans in the first quarter fell 31 percent to 919 million euros, helped by an improved economic environment, the company said. That includes 28 million euros set aside for its loan portfolios in Tunisia and Egypt.

Bank of France Governor Christian Noyer said last month French banks could withstand a default by a euro-area nation as Greek bond yields surged to a record amid concern the country will renege on its debt.

“Even in an apocalyptic scenario, only a small fraction of French banks’ Tier 1 ratio would be compromised,” Noyer said in a speech in New York on April 18. “The same results apply, with some variations, in other countries.”

French banks’ holdings of southern European sovereign debt represent 38 percent of their total Tier 1 assets, and it’s 13 percent excluding Italian government bonds, Noyer said.

BNP Paribas’s common equity Tier 1 ratio, a gauge of its ability to absorb losses, was 9.5 percent at the end of March, up from 8.3 percent a year earlier.

Pretax earnings at the French consumer-banking unit rose 14 percent to 579 million euros. Profit before tax at its BancWest unit in the U.S. amounted to 167 million euros, up 74 percent from a year earlier.

The branch networks in Belgium and Luxembourg had pretax profit of 227 million euros, a 3.8 percent drop from a year earlier. BNP Paribas in February raised its goal for cost savings and revenue gains from integrating the Fortis assets to 1.2 billion euros by 2012, from a 900 million-euro forecast made in December 2009. The bank has also revised higher its estimate of the costs to integrate the assets to 1.65 billion euros from 1.3 billion euros.

The Europe-Mediterranean unit, which includes retail- banking networks in countries such as Turkey, Ukraine, Tunisia and Egypt, had a 3 million-euro pretax profit, compared with a 51 million-euro profit a year earlier.

BNP Paribas’s Italian retail network, Banca Nazionale del Lavoro SpA, had 136 million euros in pretax profit, up 11 percent from a year earlier. The French lender, which acquired Rome-based BNL in 2006 for 9 billion euros, has about 920 branches in Italy and plans to reach 1,000 by 2013.

Pretax earnings at the investment-solutions unit, which includes asset management, private banking and insurance, rose 18 percent to 546 million euros, helped by inflows of assets from private-banking clients.