By Fabio Benedetti-Valentini Feb. 17 (Bloomberg) — BNP Paribas SA , France’s largest bank, recorded its fourth straight quarterly profit, helped by the purchase of Fortis and lower provisions for bad loans. BNP Paribas rose as much as 3.4 percent in Paris trading after the company reported net income of 1.37 billion euros ($1.89 billion) in the fourth quarter, up from a loss a year earlier and above the 1.06 billion-euro estimate of 15 analysts surveyed by Bloomberg. The bank, like Germany’s Deutsche Bank AG and New York- based Goldman Sachs Group Inc. , posted a rebound in profit last year after emerging from the worst financial crisis since the Great Depression. Provisions for doubtful loans declined 26 percent in the quarter from a year earlier, and Chief Executive Officer Baudouin Prot said in a Bloomberg Television interview that loans losses have “hopefully” passed the peak. “Provisions were much better than expected,” Kian Abouhossein , an analyst at JPMorgan Chase & Co. in London, said in a note today. BNP Paribas climbed 1.20 euros, or 2.4 percent, to 50.40 euros by 9:50 a.m. The stock gained 116 percent in Paris trading in the last 12 months, compared with a 69 percent advance in the 52-company Bloomberg Europe Banks and Financial Services Index. ING Groep NV, the biggest Dutch financial-services company, reported a 712 million-euro fourth-quarter loss today as the bank and insurer set aside 930 million euros for extra payments to the Netherlands after receiving state aid. Fortis Earnings BNP Paribas became the largest bank by deposits in the euro region with the 10.4 billion-euro purchase of Fortis’s banking units in Belgium and Luxembourg last year. “You’re getting a pretty stable earnings basis and you’ve got synergies” from the Fortis takeover, Simon Maughan , a London-based analyst at MF Global Securities Ltd. who has a “buy” rating on the stock, said before the earnings announcement. “There is a safe but predictable story there.” The French bank set aside 1.9 billion euros in provisions for doubtful loans in the fourth quarter, less than analysts’ estimate of 2.3 billion euros. Crossed ‘Peak’ “The group has hopefully crossed a peak for the cost of risk,” Prot said in the interview. While BNP Paribas expects the level of bad-loan provisions to decline in 2010 from last year, “it’s difficult to say how much lower and how fast this would appear,” the CEO said. Pretax earnings at BNP Paribas’s corporate- and investment- banking unit amounted to 834 million euros in the quarter. That compares with 1.24 billion euros in the previous three months and a record 2.07 billion-euro pretax loss in the year-earlier period, triggered by market swings after the collapse of Lehman Brothers Holdings Inc. Revenue at the investment-banking unit was 2.21 billion euros in the fourth quarter, a 25 percent decline from the prior three months. Bad-loan provisions at the investment bank were at 282 million euros, 51 percent less than the third quarter and 78 percent less than the year-earlier period. BNP Paribas’ corporate- and investment-banking unit is off to a “strong start” in 2010, Prot said, as the financing business gains market share. Compensation BNP Paribas in 2009 set aside about 28 percent of investment-banking revenue to compensate employees at the unit. That’s down from about 40 percent in previous years and excludes exceptional taxes in the U.K. and France. Barclays Plc, where Chief Executive Officer John Varley and President Robert Diamond declined bonuses for a second year, set aside 38 percent of last year’s revenue in remuneration for staff at the investment bank. BNP Paribas’ board hasn’t decided yet on the 2009 variable pay for top executives, including the CEO and Chairman Michel Pebereau , Prot told Radio Classique in an interview. The 2009 variable pay for top executives will be “capped,” he said. The bank is set to pay about 500 million euros in cash bonuses to traders for 2009, he said. Pretax profit at BNP Paribas’s investment-solutions unit, which includes asset management, private banking and insurance, rose 41 percent to 297 million euros in the quarter from a year earlier. BNP Paribas earned 5.8 billion euros last year, a 93 percent increase compared with 2008. New York’s JPMorgan & Chase Co. doubled earnings in 2009 to $11.7 billion, while profit at Goldman Sachs rose by more than five times to $13.4 billion. Frankfurt-based Deutsche Bank had net income of 5 billion euros. Cost Savings The Fortis assets contributed 708 million euros to BNP Paribas’s annual profit. The Fortis contribution to the lender’s fourth-quarter net income was 170 million euros. The French bank started integrating the purchase in May, after winning 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 in December it expects 900 million euros of cost savings and revenue gains by 2012 from the Fortis assets. The company forecasts the assets to contribute about 1.3 billion euros of annual net income to the group by 2012, when the full savings and revenue gains are expected. The bank expects to book 1.3 billion euros of costs between 2009 and 2011 to integrate the Fortis assets, BNP Paribas said on Dec. 1. The integration of the assets is expected to add to BNP Paribas’s earnings by 2010, when reorganization costs are excluded. BNP Paribas’s equity tier 1 ratio, a gauge of a bank’s ability to absorb losses, was at 8 percent by the end of December. The company raised 4.3 billion euros in October to pay back state funds and reinforce its capital. Italian Business The bank plans to pay a dividend of 1.50 euros a share for 2009. That compares with a restated 97 cents a share a year earlier, adjusted to take account of capital increases. Pretax earnings at BNP Paribas’s French consumer-banking unit rose 0.6 percent to 316 million euros in the quarter, the bank said. Profit at its Italian consumer-banking division declined 31 percent to 69 million euros. The lender’s consumer- banking networks in emerging markets posted a 70 million-euro pretax loss, compared with a 40 million-euro loss a year earlier, mostly hurt by the effects of the economic crisis in the Ukraine. BancWest, the U.S. consumer-banking unit, had a 55 million- euro pretax loss, its fourth straight deficit, compared with a 17 million-euro profit a year ago, BNP Paribas said. The bank repeated it aims for BancWest to return to profit starting in 2010. The French company is aiming to reach $130 million of savings at BancWest this year. “It’s not a priority for us to make retail acquisitions in the U.S.,” Prot said in the Bloomberg Television interview. “We would only look to make acquisitions in the U.S. on FDIC- assisted transactions.” To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net
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