BNP Paribas 3Q profit down 56 percent

PARIS - French bank BNP Paribas said Wednesday its net profit sank 56 percent in the third quarter on a 1.1 billion euro ($1.41 billion) loss linked to the financial crisis.

The euro-zone's largest banking group reported net profit of 901 million euros, ($1.15 billion) compared to 2.03 billion euros a year earlier.

BNP said its earnings for the July-September quarter were affected by "numerous critical situations in the financial services industry and unprecedented turbulence in the markets since early September."

In a statement Wednesday, the bank blamed the collapse of U.S. investment bank Lehman Brothers and major Icelandic banks, as well as the impact of rating agencies' downgrade of bond insurers. These contributed to the 1.1 billion euros loss in writedowns.

The bank took 462 million euros ($592 million) in provisions to cover its exposure to downgraded bond insurers. Downgrades make the bond insurers less likely to meet their financial obligations and increase the risk of losses on BNP holdings insured by them

Despite this, all the Paris-based bank's divisions made money during the third quarter — with flat sales and earnings at its French retail banking franchise but a drop in profits at its international retail, asset management and corporate investment banking arms.

The bank said pre-tax profit from its corporate and investment banking business plunged to 38 million euros ($48.72 million) in the quarter from 760 million euros a year earlier. BNP Paribas said it did not take advantage of new international accounting rules which would have reduced the amount of mark-downs in the quarter.

BNP Paribas' domestic retail banking division, which has 6 million clients and 2,200 branches throughout France, withstood the financial turmoil thanks to a sales and marketing drive that saw the bank open 50,000 new checking and deposit accounts in the quarter, while increasing loans to individuals and businesses.

The bank said its Tier 1 ratio, the measure commonly used to rate a bank's strength, was stable in the quarter at 7.6 percent. The bank said its acquisition of Fortis Belgium and Fortis Luxembourg will have a 0.35 percentage point positive impact on the ratio by the end of the year, with another 0.3 percentage point gain thanks to a regulatory change.

BNP Paribas have fallen 22 percent this year. BNP Paribas shares closed down 1.5 percent at 57.60 euros ($74.97) in Paris.

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