By Albertina Torsoli, Bloomberg
Paris: BNP Paribas SA, France’s largest bank by market value, reported a 25% increase in the first-quarter profit on higher corporate and investment bank earnings and gains from asset sales. The shares rose to a record.
Net income climbed to 2.51 billion euros ($3.4 billion), or 2.73 euros a share, from 2.01 billion euros, or 2.38 euros, a year earlier, Paris-based BNP said today. Profit beat the 2.06 billion-euro median estimate of 13 analysts surveyed by Bloomberg News. Revenue rose by 2% to 8.21 billion euros.
“It’s another good set of results,” said Jerome Forneris, who helps manage $8.1 billion at Banque Martin Maurel in Marseilles and owns shares in BNP Paribas. “Corporate and investment bank earnings are good and asset management also performed well in the quarter. Retail bank numbers are looking weaker but this is no surprise.”
Chief Executive Officer Baudouin Prot, in an interview, said the bank will add more jobs at its securities unit and integrate Italy’s Banca Nazionale del Lavoro SpA more quickly than planned. The French bank isn’t interested in making a bid for ABN Amro Holding NV of the Netherlands or its Chicago-based LaSalle unit, said Prot.
The stock climbed 2.49 euros, or 2.9%, to 89.99 euros, giving the bank a market value of 83.2 billion euros. BNP Paribas stock has advanced 8.9% this year, beating the 3.8% increase of the 71-member Bloomberg Europe Banks and Financial Services Index.
Pretax profit at BNP’s corporate and investment bank rose by 12%, the company said. Earnings at the French branch network declined by 2.2%, while pretax profit at BancWest slipped by 20%. Excluding Banca Nazionale del Lavoro, earnings at BNP’s international retail bank decreased by 5.3%. Asset-management profit advanced 23 %.
“BancWest is the only negative in the quarter,” said Prot, 55, in an interview. “All the other traffic lights are on the green.”
Earnings were boosted by 541 million euros in one-time gains, compared with 286 million euros a year earlier, said BNP Paribas. Most of the increase came from the sale of a stake in Paris-based clothing retailer Vivarte SA.
Profit growth at BNP Paribas outpaced UBS AG and Credit Suisse Group, the largest Swiss banks, and lagged behind the 30 % increase in net income reported by Deutsche Bank AG.
BNP’s corporate and investment bank earned 1.19 billion euros, beating the 1.08 billion-euro analysts’ estimate. Pretax earnings from its advisory and capital markets division climbed 6.7 % to 701 million euros, following an “outstanding performance in equity derivatives,” said the company.
Corporate and investment banking results are “good,” with a “big score for equity derivatives,” said Jean Sassus, an analyst at Raymond James in Paris, who has a “fair value” recommendation on the stock. It’s “a good set of results as a whole,” he said.
Pretax profit from the financing business advanced by 20% to 490 million euros, also beating estimates. The bank, which added about 600 people at its investment bank last year, is still hiring to grow in areas such as equity derivatives and fixed income. BNP Paribas will hold an investor day in London on the 20th of June on its investment bank, said Prot.
Profit at Honolulu-based BancWest fell to 220 million euros as “increasing yield curve inversion pushed down the interest margin” and “the slide in the dollar reduced the euro value of earnings,” said BNP Paribas.
“I expect the situation at BancWest to start improving relatively in the second half,” said Prot, adding that the company’s strategy for the US “hasn’t changed.”
LaSalle, ABN Amro
BNP Paribas has spent more than $8.5 billion since 1999 buying US banks including Omaha, Nebraska-based Commercial Federal Corp. and Fargo, North Dakota-based Community First Bankshares Inc. BancWest has 742 branches and about 4.2 million accounts in 20 US states, including California and Hawaii.
Prot said he doesn’t expect further acquisitions in the U.S. “for the time being.” He denied being interested in LaSalle, the U.S. unit of Dutch Bank ABN Amro.
“We have no interest for LaSalle,” said Prot. “It’s not in our footprint, not in our price range.”
Prot also said the French bank isn’t interested in buying ABN Amro, currently the object of a takeover battle, and that it is “much too early” to say whether it will consider buying ABN Amro assets in the months to come.
“The sheer size of ABN Amro, the price and the execution risk don’t make it fit in our acquisition criteria,” said Prot.
Earnings at the French branch network fell to 500 million euros in the quarter. Profit rose 5.8% to 473 million euros, with revenue at the unit up 4.1%, excluding the impact of tax regulations that last year had encouraged French clients to shift more money into life-insurance products.
Domestic consumer bank earnings are “good news,” said Kinner Lakhani, an analyst at ABN Amro in London, who has a “buy” recommendation on the stock. “French retail revenue growth was stronger than expected, driven by strong fee and commission growth, which may ease concerns in this area.”
Prot confirmed a target for 4% revenue growth at the domestic retail unit for the full year. The number of net new customers doubled to 80,000 in the quarter, said BNP Paribas.
The company also gained clients in Italy, having opened 2,000 net new accounts in the first three months of the year. Rome-based Banca Nazionale del Lavoro, known as BNL, contributed 143 million euros to the company’s pretax profit in the quarter.
Last year’s 9 billion-euro purchase of BNL gave BNP Paribas 810 branches and three million retail customers in Europe’s most- lucrative consumer-banking market. The acquisition led to lower costs and increased revenue of 27 million euros in the three months, and in the next three quarters it will yield savings and extra revenue of 116 million euros, said Prot.
“We are delivering the BNL synergies faster than we expected,” he said.