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BNP Paribas Posts Fourth Straight Quarterly Profit on Fortis


Feb. 17 (Bloomberg) — BNP Paribas SA, France’s largest bank, recorded its fourth straight quarterly profit, helped by the acquisition of Fortis and after setting aside less money for bad loans.

Net income in the fourth quarter reached 1.37 billion euros ($1.89 billion) from a 1.37 billion-euro net loss a year earlier, the Paris-based bank said in an e-mailed statement today. That beat the 1.06 billion-euro estimate of 15 analysts surveyed by Bloomberg.

BNP Paribas, like Germany’s Deutsche Bank AG and New York- based Goldman Sachs Group Inc., posted a rebound in profit last year after emerging from the worst financial crisis since the Great Depression. Led by Chief Executive Officer Baudouin Prot, the French bank became the largest by deposits in the euro region with the 10.4 billion-euro purchase of Fortis’s banking units in Belgium and Luxembourg last year.

“You’re getting a pretty stable earnings basis and you’ve got synergies” from the Fortis takeover, Simon Maughan, a London-based analyst at MF Global Securities Ltd. who has a “buy” rating on the stock, said before the earnings announcement. “There is a safe but predictable story there.”

BNP Paribas has gained 95 percent in Paris trading in the last 12 months, compared with a 57 percent advance in the 52- company Bloomberg Europe Banks and Financial Services Index.

Provisions

The lender set aside 1.9 billion euros in provisions for doubtful loans in the fourth quarter, a 26 percent decline from a year earlier. That beat analysts’ estimates for 2.3 billion euros.

Pretax earnings at BNP Paribas’s corporate- and investment- banking unit amounted to 834 million euros in the quarter. That compares with 1.24 billion euros in the previous three months and a record 2.07 billion-euro pretax loss in the year-earlier period, triggered by market swings after the collapse of Lehman Brothers Holdings Inc.

“They’re more or less in line with investment-banking peers,” said Jaap Meijer, a London-based analyst at Evolution Securities Ltd. who has a “buy” rating on the shares.

Revenue at the investment-banking unit was 2.21 billion euros in the fourth quarter, a 25 percent decline from the prior three months. Bad-loan provisions at the investment bank were at 282 million euros, 51 percent less than the third quarter and 78 percent less than the year-earlier period.

Compensation

BNP Paribas in 2009 set aside about 28 percent of investment-banking revenue to compensate employees at the unit, it said. That’s down from about 40 percent in previous years and excludes exceptional taxes in the U.K. and France. Barclays Plc, where Chief Executive Officer John Varley and President Robert Diamond declined bonuses for a second year, set aside 38 percent of last year’s revenue in remuneration for staff at the investment bank.

Pretax profit at BNP Paribas’s investment-solutions unit, which includes asset management, private banking and insurance, rose 41 percent to 297 million euros in the quarter from a year earlier.

BNP Paribas earned 5.8 billion euros last year, a 93 percent increase compared with 2008. New York’s JPMorgan & Chase Co. doubled earnings in 2009 to $11.7 billion, while profit at Goldman Sachs rose by more than five times to $13.4 billion. Frankfurt-based Deutsche Bank had net income of 5 billion euros.

The Fortis assets contributed 708 million euros to BNP Paribas’s annual profit. The Fortis contribution to the lender’s fourth-quarter net income was 170 million euros. The French bank started integrating the purchase in May, after winning a seven- month battle to swallow the Belgian and Luxembourg banking assets of what was once Belgium’s largest financial-services company.

Cost Savings

BNP Paribas said in December it expects 900 million euros of cost savings and revenue gains by 2012 from the Fortis assets. The company forecasts the assets to contribute about 1.3 billion euros of annual net income to the group by 2012, when the full savings and revenue gains are expected.

The bank expects to book 1.3 billion euros of costs between 2009 and 2011 to integrate the Fortis assets, BNP Paribas said on Dec. 1. The integration of the assets is expected to add to BNP Paribas’s earnings by 2010, when reorganization costs are excluded.

BNP Paribas’s equity tier 1 ratio, a gauge of a bank’s ability to absorb losses, was at 8 percent by the end of December. The company raised 4.3 billion euros in October to pay back state funds and reinforce its capital.

Italian Business

“Since the start of the crisis” BNP Paribas has been “one of the few actors in Europe capable of enlarging its domestic market while considerably reinforcing its level of solvency,” CEO Prot said in the statement.

The bank plans to pay a dividend of 1.50 euros a share for 2009 from 1.00 euro a year earlier.

Pretax earnings at BNP Paribas’s French consumer-banking unit rose 0.6 percent to 316 million euros in the quarter, the bank said. Profit at its Italian consumer-banking division declined 31 percent to 69 million euros. The lender’s consumer- banking networks in emerging markets posted a 70 million-euro pretax loss, compared with a 40 million-euro loss a year earlier, mostly hurt by the effects of the economic crisis in the Ukraine.

BancWest, the U.S. consumer-banking unit, had a 55 million- euro pretax loss, its fourth straight deficit, compared with a 17 million-euro profit a year ago, BNP Paribas said. The bank repeated it aims for BancWest to return to profit starting in 2010. The French company is aiming to reach $130 million of savings at BancWest this year.