BNP Paribas Profit Drops as Structured-Products Business Takes Hit - 2nd Update
May 05 2020 - 10:19AM
Dow Jones News
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, BNP Paribas suffered a
big hit in its equity derivatives unit from companies that canceled
their dividend payments. It is 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.
In Europe, banks came into the crisis in worse shape than their
U.S. rivals, after struggling for years with sluggish growth and
persistently low interest rates that put their core businesses
under severe pressure.
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 coronavirus outbreak and the lockdowns.
"The health crisis has had major repercussions on macroeconomic
outlook and produced extreme shocks on the financial markets," the
bank said in a statement.
It set aside EUR657 million to cover bad loans, raising its
total provision to EUR1.43 billion.
Still, the bank's earnings and outlook were slightly above
expectations, underscoring the resilience of BNP Paribas's
diversified business model, analysts said.
Some analysts, however, noted a weaker than expected core Tier 1
capital ratio -- a key measure of capital strength -- and low
provisions.
"The optimistic outlook statement relative to expectations may
support the shares initially but we would expect this to fade as
focus shifts to worse-than-expected capital and a lack of
provisioning in all but the corporate bank and consumer credit,"
Barclays analysts wrote in a note.
BNP Paribas shares were 2.2% higher at EUR27.70 in midafternoon
trading in Paris having been up about 5% in early trading.
BNP's core Tier 1 capital ratio -- that measures a bank's top
quality capital such as equity and retained earnings against
risk-weighted assets -- stood at 12% in March from 12.1% in
December, still well above the 9.31% threshold set by the European
Central Bank for the French lender.
Strong fixed-income 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 -- was also down 5.4% at EUR4.05 billion.
Write to Noemie Bisserbe at noemie.bisserbe@wsj.com and Pietro
Lombardi at Pietro.Lombardi@dowjones.com
(END) Dow Jones Newswires
May 05, 2020 10:04 ET (14:04 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
Societe Generale (EU:GLE)
Historical Stock Chart
From Aug 2024 to Sep 2024
Societe Generale (EU:GLE)
Historical Stock Chart
From Sep 2023 to Sep 2024