BNP Paribas reported a fall in net income for the first quarter on Tuesday, as it warned the coronavirus has had three "major negative impacts" on its balance sheet.
The French lender reported a net income of 1.3 billion euros ($1.42 billion) for the first three months of the year, down 33% from 1.9 billion euros a year ago, according to results released Tuesday.
"The first quarter started very well and then towards the end it was impacted by the Covid-19 in particular around three aspects that impacted the result," Lars Machenil, chief financial officer of BNP Paribas told CNBC.
"The first one is, of course, a step up in the cost of risk. So, we stepped up our costs of risk to half a billion and then there are two one off events in the top line," he told CNBC's Charlotte Reed.
The bank set aside 502 million euros for potential loan losses as a result of the ongoing pandemic. It also reported a 184 million revenue loss from new dividend restrictions and a 384 million euro drop in market valuation.
Other key metrics from the latest quarter include:
- Revenues came in at 10.9 billion euros versus 11.1 billion a year ago;
- Operating expenses were 8.2 billion euros versus 8.5 billion euros a year ago;
- CET 1 ratio rose to 12% from 11.7% a year ago.
Revenue in its international financial services unit fell more than 5% from a year ago, as the recent decline in stock market valuations impacted the value of its assets under management.
Recent market volatility also hit the bank's equity and prime services' business. Revenues fell to -87 million euros from 488 million euros a year ago.
In its domestic market, France, revenues in the retail business dropped 4.4% from a year ago. BNP Paribas managed to keep almost 90% of its branches open in March despite the health crisis.
Outlook
"The recovery will be gradual," Machenil told CNBC, suggesting that the economy was unlikely to return to pre-virus levels before the end of the year.
"In our scenario, the return to a level of GDP like it was in 2019 will not be reached before 2022," he said, referring to its home market.
BNP Paribas is forecasting a drop in net income between 15 and 20% for 2020 compared to 2019, given the ongoing economic crisis and provided there are no new developments in this context.