Europe News

BNP Paribas to Sell $11 Billion Energy Loan Portfolio

By Anousha Sakoui, Helen Thomas and Scheherazade Daneshkhu

BNP Paribas, France’s largest bank by assets, has put on the block up to $11 billion of loans to oil and gas companies.

The disposal, which would be one of the largest by the bank in recent months, comes as BNP aims to reduce its balance sheet by about 10 percent, or €70 billion ($92 billion), before the end of 2012, in particular cutting its US dollar funding needs to shore up confidenceamong rattled investors.

People with knowledge of the situation said the energy loan portfolio was on the market and BNP was talking to at least three potential buyers.

The portfolio contains loans with a face value of about $11 billion, of which only $4 billion has been drawn by the borrowers, they said. Large US and Canadian banks are thought to be the most logical acquirers of the assets, one added.

The sale process comes as BNP reduces its Houston business, the center of the US oil and gas industry, shifting some of its bankers to New York.

BNP would not comment on the asset sale but one person close to the bank said it was not quitting the global energy business and remained committed to lending money to strategic clients in the sector.

Its domestic rivals, Société Générale and Crédit Agricole, are also selling assets and shrinking their balance sheets to meet capital rules set by regulators for June this year.

Businesses earmarked for disposal are those that consume a lot of capital but are relatively low in profit, including books of aircraft, shipping, infrastructure and trade finance.

BNP’s aim was to reduce its US dollar financing requirements by $60 billion and it was expected to have cut those by about $40 billion by the end of 2011.

Separately, Jacques-Olivier Thomann, head of commodity trade finance at BNP and president of Geneva’s commodities industry association, said lending to the commoditiestrading industry would drop by more than a quarter as the European banks that dominate the market rein in their activities.

North American banks are keen to increase their exposure to a sector that has proved consistently hungry for capital and where mergers and acquisitions activity has held up over the past year.