GO
Loading...

BNP Paribas Warns of Fourth-Quarter Profit Dip

BNP Paribas, France's biggest listed bank, said on Wednesday it expected fourth quarter profits to be lower than a year earlier as rumors swirled that it may pounce on weakened rival Societe Generale.

BNP Paribas estimated that its 2007 fourth quarter net profit would fall 41.8 percent to 1 billion euros ($1.48 billion), while its gross operating profit would decline by 7 percent to 2.2 billion.

BNP Paribas reported a 2006 fourth quarter net profit of 1.719 billion euros and a gross operating profit of 2.398 billion euros.

In line with other top banks, BNP Paribas said the global credit crunch had affected its earnings. On Wednesday, Swiss bank UBS posted an $11.5 billion loss.

BNP Paribas said the crisis had an impact of 309 million euros on its cost of risk during the fourth quarter.

"Despite the severity of this crisis, BNP Paribas is pursuing its development drive and confirming its leading positions," Chief Executive Baudouin Prot said in a statement.

BNP Paribas was cited by traders last August as contributing to a slump in world stock markets after the French bank said it was freezing three investment funds in the wake of the U.S. subprime mortgage crisis.

SocGen Bid Speculation

On Tuesday, there was market speculation that BNP Paribas might make a bid for smaller French rival SocGen, which has been hit by the industry's biggest trader scandal.

Shares of BNP Paribas closed lower by 1.1 percent on Wednesday. Based on latest prices, BNP Paribas has a market capitalization of roughly 60 billion euros while SocGen's market capitalization stands at 36 billion.

On Jan. 24, SocGen said it had uncovered massive unauthorized stock trading by one of its employees that led to a loss of 4.9 billion euros.

SocGen's problems have made it vulnerable to a takeover and the French government has said it is keen that the bank should remain in French hands.

This has led to renewed speculation that SocGen may end up with BNP Paribas, which made a failed bid for its cross-town rival in 1999.

BNP Paribas declined to comment on the SocGen speculation on Tuesday.

However, a source familiar with the matter told Reuters that BNP Paribas had not ruled out bidding for SocGen although any move was unlikely to be imminent.

BNP Paribas made no reference to SocGen in its statement on Wednesday concerning its estimated 2007 results.

The bank said in a slide presentation on its website that it had a "solid financial situation providing the group with the means to grow."

BNP Paribas has consistently stated in the past that it was not interested in tying up with SocGen.

However, analysts say SocGen's current woes and weakened stock price may encourage BNP to reconsider its position.

"In recent months, BNP Paribas has made it clear that a tie-up with SocGen is not on the agenda. However, we would expect that BNP Paribas' management to be more amenable to a deal now, as SocGen's share price has fallen significantly," ING analysts said in a research note.

BNP Paribas proposed a 2007 dividend of 3.35 euros per share, up 8 percent from last year.

Banks

  • Richard Kovacevich in 2007.

    There were only 20 banks that caused the crisis, and "they're all gone," former Wells Fargo CEO Dick Kovacevich told CNBC.

  • How much the banking industry has changed since the collapse of Lehman Brothers, with Richard Kovacevich, Wells Fargo former chairman and CEO.

  • How much of a game changer is Apple Pay? Max Wolff, Manhattan Venture Partners chief economist, and Hans Morris NYCA, discuss the mobile pay ecosystem and why Apple Pay will succeed where others failed.