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BNP Paribas Profit Rises 31%, Beating Estimates, as Loan Provisions Drop

BNP Paribas SA, France’s biggest bank, said second-quarter profit rose 31 percent as bad-loan provisions dropped to the lowest level since before Lehman Brothers Holdings Inc.’s 2008 bankruptcy.

Net income rose to 2.11 billion euros ($2.76 billion) from 1.6 billion euros a year earlier, the Paris-based bank said in an e-mailed statement. Earnings topped the 1.61 billion-euro median estimate of eight analysts surveyed by Bloomberg.

Profits at BNP Paribas’s branch networks in France, Belgium and the U.S. rose, more than offsetting a drop in corporate- and investment-banking earnings. BNP Paribas, like competitors Deutsche Bank AG and Goldman Sachs Group Inc., had a drop in trading revenue in the quarter as concerns about swollen budget deficits dragged down the bonds of Greece, Spain and Portugal and roiled stock markets.

“These results illustrate the strength of BNP Paribas’ model,” the bank said in the statement. “After discernible tension in May, short-term liquidity again became very abundant,” BNP Paribas said.

BNP Paribas’s purchase of assets from Fortis during the depths of the financial crisis helped buoy profit. The bank’s overall provisions from doubtful loans fell 54 percent to 1.08 billion euros from a year earlier, the lowest since the second quarter of 2008.

At the corporate and investment bank, revenue dropped 30 percent from a year earlier as sales from advisory and capital markets declined 50 percent. Fixed-income revenues were affected by “the considerable contraction in primary markets, the widening credit spreads and the sharp rise in volatility,” the bank said. The financing business reported a 43 percent revenue increase from a year earlier.

Stress Tests, Basel

European banks rallied last week as all but seven of 91 European Union lenders passed stress tests, and as regulators said they would soften rules proposed for the industry. French banks are among the biggest beneficiaries of the changes in proposed rules on capital and liquidity announced July 26 by the Basel Committee on Banking Supervision, analysts said.

BNP Paribas rose 5.8 percent to 52.71 euros last week. Societe Generale, France’s No. 2 bank by market value, climbed 16 percent and Credit Agricole SA, the third-largest bank in France, jumped 12 percent. Societe Generale and Credit Agricole are also based in Paris.

The stress tests showed that BNP Paribas has more than 20 billion euros of excess capital under the “worst case scenario,” the company said. Its total net exposure to Greece, Spain, Portugal, Ireland and Italy amounted to 34 billion euros at the end of March, compared with 17.9 billion euros at Credit Agricole and 10.6 billion euros at Societe Generale, the French banking regulator said on July 23.

Investment Bank, Retail

Pretax profit at BNP Paribas’s corporate- and investment- banking division fell 7.3 percent to 1.28 billion euros, beating the 1.19 billion-euro estimate of analysts.

“This quarter, for the first time since the second quarter 2007, provision write-backs exceeded new provisions,” BNP Paribas said. The unit’s loan book “saw no new significant doubtful loans.”

BNP Paribas’s French branch network had second-quarter pretax earnings of 479 million euros, up from 414 million euros a year earlier, the bank said. The consumer-banking unit in Belgium and Luxembourg had a 156 million-euro pretax profit, compared with a 26 million-euro loss last year.

BancWest, BNP Paribas’s U.S. branch network, had a 153 million-euro pretax profit, compared with a 62 million-euro loss last year. BNP Paribas is seeking “a growth drive in the United States, taking advantage of the group’s new size with large clients and consolidating BancWest’s return to profit,” it said.

Pretax profit at BNP Paribas’s investment-solutions unit, which includes asset management, private banking and insurance, rose 32 percent to 473 million euros, the bank said. The asset- management unit had 8.9 billion euros of outflows in the quarter because of “customers’ greater aversion to risk” as equity markets fell and credit spreads widened, BNP Paribas said.