TEXT - Fitch says BNP Paribas Q4 results have no ratings impact

Fri Feb 15, 2013 12:18pm EST

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(The following statement was released by the rating agency)
    Feb 15 - Fitch Ratings says that BNP Paribas' (BNPP;
'A+'/Stable/'a+') Q412 earnings are ratings neutral. Operating profit (EUR1.7bn 
as calculated by Fitch) was lower quarter-on-quarter (qoq -43%) but higher 
year-on-year (yoy +52%). Fitch derives operating profit, its measure of 
underlying earnings, after excluding certain items such as revaluation of own 
debt (a loss of EUR286m in Q412 as spreads reduced further). 

The bank's Q412 results illustrate the continued progress in improving its 
capital. Fitch considers such improvements give BNPP more leeway than some peers
in expanding its franchise or seizing growth opportunities.

Operating profit from the retail banking business, which is BNPP's main earnings
contributor, was down 20% qoq, partly reflecting earnings seasonality, but up 2%
yoy. BNPP continues to benefit from the diversification of its retail banking 
franchise, as all core franchises generate satisfactory operating profits. The 
difficult economic environment continued to weigh on results, with a general 
fall in new lending (mainly for housing and consumer loans), a rise in loan 
impairment charges and sluggish customer fee generation. Loan impairment charges
in France and Belgium rose qoq, but remained low (22bp and 24bp respectively of 
customer loans in Q412 on an annualised basis) and Fitch does not expect any 
material rise in the coming quarters. However, the agency believes impairment 
charges in Italy will remain high (137bp in Q412 vs. 110bp in Q312) albeit 
manageable. 

  

Operating profit from the Corporate and Investment Banking (CIB) segment in Q412
(EUR261m), although far higher than the low level in Q411 (EUR44m), was lower 
qoq (-64%), reflecting earnings volatility and seasonality for this business (Q4
is traditionally the lowest quarter for CIB). Revenue from fixed income 
activities in the quarter was one of the lowest over the past two years and 
revenue from equities and advisory activities also suffered from low transaction
volumes. Revenue from financing activities remained resilient in Q412, but has 
been durably negatively affected by the bank's deleveraging plan. Loan 
impairment charges continued to increase significantly (82bp of customer loans 
in Q412 on an annualised basis). Nonetheless, Fitch does not expect this level 
of impairment charges to be repeated as a large part of the Q412 increase 
relates to a sizeable single exposure. 

BNPP's investment solutions business continued to perform well in Q412, 
benefiting from improved market performance. Operating profit rose by 19% qoq. 

Fitch considers BNPP's capital ratios compare well with those of peers. The 
bank's Basel 2.5 core Tier 1 regulatory capital ratio rose to 11.8% at end-2012 
and its fully loaded Basel III ratio rose to 9.9%, well above its 9% target by 1
January 2013. This is a result of retaining healthy earnings and deleveraging. 
Fitch does not expect BNPP to continue increasing its capital ratios in the near
term as it has already exceeded its target. The bank announced it will 
distribute 30% of 2012 net profit. 

BNPP's liquidity buffer amounted to EUR221bn at end-2012 (EUR200bn at end-June 
2012), and more than covered the bank's one year short-term wholesale funding 
(EUR185bn at end-2012). Deposits with central banks and investments in highly 
rated governments bonds roughly cover the bank's one year short-term wholesale 
funding excluding LTRO. 

 (Caryn Trokie, New York Ratings Unit)
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