BNP Paribas SA, France’s largest bank, reported an increase in second-quarter profit, helped by the acquisition of Fortis assets and higher investment-banking revenue.

Net income rose 6.6 percent to 1.6 billion euros ($2.3 billion), compared with 1.51 billion euros reported a year earlier, the Paris-based bank said in an e-mailed statement today. Earnings beat the 1.26 billion-euro median estimate of 17 analysts surveyed by Bloomberg.
The corporate and investment bank posted pretax profit of 1.15 billion euros, more than doubling from the year earlier on higher fixed-income revenue following a thaw in credit markets. BNP Paribas also recorded 261 million euros in net income from the Fortis operations it purchased earlier this year.
“That’s one of the reasons why we like BNP Paribas, because of their strong CIB division,” Jaap Meijer, a London-based analyst at Evolution Securities who rates BNP Paribas “buy,” said before the release of earnings.
BNP Paribas gained 74 percent so far this year in Paris trading, the eighth-biggest gain in the 63-company Bloomberg Europe Banks and Financial Services Index. Paris-based Societe Generale SA, France’s No. 2 bank by market value, has risen 28 percent this year.
“This was another strong quarter,” Chief Executive Officer Baudouin Prot said in an interview with Bloomberg Television. “Certainly we are off to a good start with Fortis.”
Earnings at the investment bank exceeded analysts’ median estimate of 944 million euros. The unit returned to profit in the first quarter following a record 2.07 billion-euro pretax loss in the final three months of 2008 triggered by market swings after the collapse of New York-based Lehman Brothers Holdings Inc.
Barclays Plc and HSBC Holdings Plc surged in London trading yesterday after earnings from their securities units doubled in the first half. Goldman Sachs Group Inc. of New York posted record quarterly profit last month on revenue from trading stocks and bonds.
BNP Paribas started integrating Fortis in May. The French bank won investors’ support in April, ending a seven-month battle to swallow the Belgian and Luxembourg banking assets of what was once Belgium’s largest financial-services company. BNP Paribas said it will lay out the industrial plan for Fortis on Dec. 1.
“They’re going to benefit dramatically from Fortis,” said Meijer at Evolution Securities. “They’re strengthening themselves during the crisis.”
BNP Paribas also booked an 815 million-euro “badwill” gain linked to the Fortis purchase. That was offset by writedowns on past acquisitions of 524 million euros, 440 million euros of markdowns on shares in companies including South Korea’s Shinhan Financial Group, and a 237 million-euro charge related to an improvement in its own debt, BNP said.
BNP Paribas, which largely sidestepped the U.S. subprime mortgage market collapse, hasn’t been able to dodge the economic impact. Total provisions for risky loans at BNP Paribas more than tripled to 2.35 billion euros in the quarter, above the 1.88 billion-euro estimate of analysts.
The Tier 1 capital ratio, a key indicator of financial health, rose to 9.3 percent at the end of June from 8.8 percent at the end of March.
BNP Paribas said March 31 it issued 5.1 billion euros in preference shares to be bought by the French government as part of the country’s aid to banks. In return for the government cash injection, BNP Paribas and other French banks agreed to increase the volume of outstanding loans to households and companies.
Chairman Michel Pebereau, 67, and Prot, 58, were the first among top managers at France’s largest banks to give up bonuses for 2008, clearing the way for state assistance.
Prot said in June that French banks may start repaying state aid in the beginning of 2010.
Pretax earnings at the French retail network fell to 394 million euros from 461 million euros a year earlier, the bank said. Retail banking in emerging markets had a pretax loss of 39 million euros, compared with a 147 million-euro profit a year earlier. BNP, which stopped making new loans in Ukraine after posting losses at its retail unit in the country, said in May it cut 480 jobs and closed 81 branches there. The French bank has closed 69 additional branches in the country during the second quarter, it said.
BancWest, the U.S. retail banking unit, had a pretax loss of 70 million euros, compared with a 115 million-euro profit a year earlier.
(Source: Bloomberg)