BNP nears end of asset sales as profit rises
PARIS (Reuters) - BNP Paribas (BNPP.PA), France's No.1 listed bank, said on Friday it had almost wrapped up its plan to sell assets and cut debt to strengthen financial firepower after its first-quarter profits were boosted by the sale of shares in Klepierre (LOIM.PA).
Euro zone-focused BNP, one of the world's biggest banks by assets, has been retrenching from its international empire since last summer's flare-up of the euro zone debt crisis triggered a fresh wave of cutbacks across the investment-bank industry.
The bank's chief executive said BNP would soon be in a stronger position to grow its business but warned that its capital markets unit had seen a "less positive" start to the second quarter after a central-bank-driven rally petered out.
"Eighty percent of the deleveraging is done," BNP Chief Executive Jean-Laurent Bonnafe said in an interview with Reuters Insider television. "We can close everything by the summer."
Like smaller rival Societe Generale (SOGN.PA), which reported results on Thursday, BNP ploughed ahead with its strategy of selling loan assets and sovereign bonds in the quarter to boost capital as the industry races to meet tougher incoming lending rules in a slowing economy.
This push is almost complete for BNP, which said its end-March core Tier 1 capital ratio - a key measure of banks' ability to withstand losses - had risen to 10.4 percent under a tougher methodology known as Basel 2.5. SocGen's stood at 9.4.
Despite their drive to strengthen their balance sheets, BNP and SocGen are treated by investors as proxies for the euro and have seen their share prices fall 25 percent since March highs on renewed fears over the health of the 17-nation euro zone.
BNP's CEO said the bank had limited exposure to Spain's economic woes and also said he thought France - which is two days away from a presidential run-off vote - would avoid recession this year.
Declining to comment on a campaign pledge by Socialist frontrunner Francois Hollande to curb banks' risky activities, Bonnafe nonetheless played down fears that a left-wing victory would create uncertainty for the French economy.
"Both candidates (Hollande and conservative incumbent Nicolas Sarkozy) are committed to tackle public deficits, so that is one point that is positive," he told Reuters Insider. "Both candidates in different ways are also committed to give a hand to growth."
At 0707 GMT, BNP Paribas shares were down 1.6 percent, at 28.65 euros, the second-worst performer in the STOXX EURope 600 bank index .SX7P.
"I thought the results were good, across all divisions, and the stronger capital is an important point ... Despite this, the negative reaction suggests still the environment of doubts over bank stocks, particularly in France, where investors seem to want to wait it out until the presidential elections are over," said Yohan Salleron, fund manager at Mandarine Gestion.
BNP reported net income of 2.87 billion euros ($3.77 billion), up 9.6 percent from a year-ago figure of 2.62 billion. This was above forecasts for 2.3 billion, according to the Thomson Reuters I/B/E/S average of seven analyst estimates.
Earnings were flattered by a 1.5 billion-euro capital gain from the sale of part of its stake in real-estate group Klepierre to Simon Property Group (SPG.N) in March.
BNP's revenue, however, fell by a higher-than-expected 15.4 percent to 9.89 billion euros, hit by own-debt accounting charges and losses from the sale of sovereign bonds as it reeled back its exposure to the euro zone's troubled periphery.
"The underlying results are solid, in line with expectations, with domestic retail holding up but costs rising at the corporate and investment bank," said a London-based bank analyst.
BNP's corporate and investment bank, which is bearing the brunt of asset sales and job cuts under a voluntary departure plan, saw pre-tax profits fall by almost a third.
Although revenue from bonds, currencies and commodities trading grew 6.6 percent in the quarter, this failed to match SocGen's surprise 39 percent surge in the same period, and BNP's Bonnafe told Reuters Insider that there had been a "less positive" start to the second quarter.
(Editing by James Regan and Jon Loades-Carter)