UPDATE 2-BNP Paribas plans Germany push after earnings slip
* To hire hundreds of staff, chase German deposits
* Q2 net income down 4.7 pct, a smaller-than-expected drop
* Italy loan losses, investment banking weakness weigh
* BNP seeing "signs of improvement" in Europe
* Not seeking acquisitions, "no need" to raise capital
(Adds sector comparison, investment banking figures)
PARIS, July 31 (Reuters) - French bank BNP Paribas unveiled a plan on Wednesday to boost its presence Germany, Europe's biggest and most resilient economy, after fresh cost cuts failed to offset sliding quarterly earnings in markets like Italy.
The plan will see BNP, the euro zone's biggest bank by market value, hire hundreds of staff over the next three years and chase client deposits online without building a branch network.
BNP derives more than half its annual revenue from its core French, Italian and Belgian markets. The euro zone's economic problems are pushing the bank to chase growth in markets like Asia and the United States, as well as Germany, while stepping up cost savings.
Though cost cuts helped bring expenses down in the second quarter, they were not enough to avert a 4.7 percent drop in quarterly net income to 1.76 billion euros ($2.33 billion) amid rising loan-loss provisions in Italy and investment banking weakness. BNP's revenue also fell 1.8 percent to 9.92 billion.
The declines were smaller than expected, however. Analysts had been expecting 1.51 billion euros in net profit and 9.84 billion in revenue, according to the average of forecasts compiled by Thomson Reuters I/B/E/S.
Among one-off items in the quarter was a 218 million euro gain from the sale of a "bad-bank" portfolio of toxic assets that once belonged to Fortis, a Benelux bank bought by BNP in the midst of the 2008 financial crisis.
BNP Chief Operating Officer Philippe Bordenave said there were signs of improvement in Europe but that they would only fully become visible in the second half of 2013.
"We are seeing early signs of improvement but ... it will be more in the second part of the year," he told Reuters Insider.
Commenting on the outlook for loan-loss provisions, he added: "We are relatively confident as far as France and Belgium are concerned ... in Italy, it may be somewhat more difficult."
Italy has been in recession since mid-2011 and its government does not see a return to growth before the fourth quarter of this year.
BNP is not seeking acquisitions and does not need to raise capital as its balance sheet is "rock solid", Bordenave said.
BNP's performance follows a mixed bag of European bank results, with Britain's Barclays announcing a $9 billion cash call to meet tougher rules on risk and Germany's Deutsche Bank promising a fresh slew of asset sales.
BNP is more relaxed than many large rivals about its balance sheet strength: it is one of the best capitalized banks in Europe with a core capital ratio of 10.4 percent and a core leverage ratio of 3.4 percent under tougher Basel III rules, above the minimum required and slightly above-average.
But its corporate and investment bank has been singled out as an area of underperformance by analysts. In the second quarter that division's pretax profit fell almost 40 percent, with declining bond-trading revenues and "limited" demand in Europe for corporate banking offsetting a rebound in equities.
By contrast, UBS' investment bank swung to a pretax profit from a pretax loss in the quarter, with operating profit at the division up by almost a third. Deutsche Bank saw a 58 percent rise in pretax profit at its trading and corporate banking unit.
Asked whether trading profits had suffered from recent worries that central banks such as the U.S. Federal Reserve would start withdrawing liquidity from markets, BNP's Bordenave said business had been "difficult" in June but that there had been no portfolio losses.
The COO added that, despite cheap bank-sector valuations, BNP didn't think it was time for acquisitions.
Shares of BNP are up 12.4 percent year-to-date, giving the bank a market capitalization of 59.5 billion euros. It has underperformed rivals that have undergone a more radical restructuring such as France's Natixis, Credit Agricole and Switzerland's UBS.
($1 = 0.7547 euros)
(Editing by James Regan and Mark Potter)