GLE Societe Generale SA

By Noemie Bisserbe and Pietro Lombardi 

PARIS -- BNP Paribas SA reported Tuesday a drop in first-quarter net profit as France's largest bank set aside new provisions to prepare for a flood of customers to default on their loans because of the coronavirus pandemic.

Like crosstown rival Société Générale SA, companies that canceled their dividend payments dealt a big hit to BNP Paribas's equity derivatives unit -- a business where the two French banks have a strong foothold. The move wiped EUR184 million ($200 million) from BNP Paribas' structured products revenue this quarter.

Banks world-wide have been setting aside billions of dollars to cover bad loans and have been shoring up capital by canceling dividends and share buybacks, as lockdowns and uncertainty as a result of the novel coronavirus pandemic have slammed the brakes on the global economy.

The Paris-based lender, the biggest by assets in France, said net profit fell by 33% to EUR1.28 billion in the three months ended March 31, while revenue declined by 2% to EUR10.89 billion.

BNP Paribas warned net profit for 2020 might fall by 15% to 20% as a result of the health crisis. The lender pledged to intensify its efforts to cut costs, but warned this could be offset by increasing provisions.

It set aside EUR657 million to cover bad loans, raising its total provision to EUR1.43 billion.

Strong fixed revenue, up 34% to EUR1.39 billion, helped offset the EUR87 million loss posted by the bank's equity business. As a result, BNP Paribas's corporate and investment bank reported a 1.9% decline in revenue to EUR2.95 billion. The bank's domestic-markets division, which includes retail operations in Italy, France and Belgium, posted a 1.6% decline in revenue to EUR3.76 billion. Revenue at its international financial-services unit -- which includes wealth management, consumer finance and insurance -- were also down 5.4% at EUR4.05 billion.

Still, BNP's core Tier 1 capital ratio -- a key measure of capital strength -- stood at 12% in March from 12.1% in December, well above the requirements notified by the European Central Bank, and in line with the bank's target.

BNP Paribas shares were up 4.6% at EUR28.35 in early morning trading in Paris.

Write to Noemie Bisserbe at noemie.bisserbe@wsj.com and Pietro Lombardi at Pietro.Lombardi@dowjones.com

(END) Dow Jones Newswires

May 05, 2020 05:29 ET (09:29 GMT)

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