BNP Paribas Has Q4 Loss; Braced for Tough Year

February 19, 2009

BNP Paribas, the French bank embroiled in plans to carve up struggling rival Fortis, posted an expected fourth-quarter loss and said market conditions would remain tough in 2009.

France’s biggest bank by market capitalisation on Thursday reported a net loss of 1.37 billion euros ($1.73 billion) — in line with guidance given last month for a loss of around 1.4 billion euros.

It also cut its dividend by 70 percent from last year to 1 euro per share. Last year, it made a fourth-quarter net profit of around 1.01 billion euros.

BNP was hit by losses at its investment banking arm, a 345 million euro exposure to an alleged $50 billion fraud by U.S. financier Bernard Madoff, and by a slump in the economy of Ukraine, where it has operations.

“One of the main points was losses on revenues in equity derivatives,” said a London-based analyst, who declined to be named.

BNP said it would cut jobs in Ukraine and close 100 bank branches there. BNP expected market conditions for 2009 to remain very difficult but added it was well-placed to cope with the tough climate.

“I’m comfortable that BNP Paribas will remain largely profitable this year,” Chief Executive Baudouin Prot told CNBC television.


Its results were worse than those posted on Wednesday by French rival Societe Generale.

SocGen reported a fourth quarter net profit of 87 million euros and increased its dividend by 33 percent.

However, BNP’s losses were not as bad as those suffered by many of its rivals, such as Swiss banks UBS and Credit Suisse which posted fourth quarter losses of 8 billion and 6 billion Swiss francs respectively.

BNP is currently in talks with the Belgian government over trying to find a solution for Fortis, whose shareholders have voted against state-led deals to carve the bank and hand some of its main assets to the French lender.

Following anger in Belgium from Fortis shareholders who felt their stakes were being sold off too cheaply, an initial October deal to carve up Fortis was revised at the start of this year.

BNP would now take a 10 percent stake in Fortis Insurance Belgium instead of 100 percent of the business, as previously planned. BNP also said that the revised Fortis deal would no longer boost its key capital ratio.

The French bank has said that the initial October agreement on Fortis is legally binding until the end of February.

BNP Paribas shares closed up 2.6 percent at 24.62 euros on Wednesday, giving the bank a market capitalisation of around 22 billion euros. The stock has fallen around 19 percent since the start of the year, compared with a 22 percent drop in the DJ Stoxx European bank sector. ($1=.7941 Euro)

(Editing by Marcel Michelson and David Cowell)

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