UPDATE 1-BNP Paribas pledges cuts after profits fall

Fri May 3, 2013 1:34am EDT

* Net income down 45 percent in lacklustre economy

* Analysts had expected bigger drop in profits

* BNP is pushing to optimise costs at retail bank -CEO

* ECB rate cut a "positive" sign -CEO

By Lionel Laurent and Matthias Blamont

PARIS, May 3 (Reuters) - French bank BNP Paribas pledged to keep cutting costs and staff amid a lacklustre economic environment after reporting a 45 percent drop in first-quarter net income on Friday.

France's No. 1 listed bank, which is heavily exposed to the recession-hit euro zone, is in the early stages of a plan to save 2 billion euros ($2.6 billion) annually by 2015.

"We are improving the efficiency of the retail business in France, tackling the cost base," BNP Chief Executive Jean-Laurent Bonnafe told Reuters Insider television.

"We are optimising all dimensions."

Other European lenders such as Germany's Deutsche Bank and Switzerland's UBS are also in a push to cut costs and strengthen balance sheets in the face of tough post-crisis financial markets and a regulatory crackdown on bank risk.

BNP said it had begun offering "early-retirement" plans for staff at its Belgian and Italian subsidiaries, without giving more details.

The bank is also preparing to launch a wholly online European bank to try and offset slowing growth at its retail branches. Union sources have said the bank is targeting 500,000 customers over five years.

BNP said its first-quarter earnings had fallen 44.8 percent, to 1.58 billion euros ($2.1 billion), on the back of weakness in its domestic market and the rocky impact of the EU's bailout of Cyprus on financial markets.

This was not as bad as analysts' expectations for 1.53 billion euros in net profit, according to an average of analyst forecasts compiled by Thomson Reuters I/B/E/S.

Revenues from capital-markets trading and sales, which are heavily geared towards bonds, other fixed-income products and currencies, fell 25.2 percent year-on-year.

Praising the European Central Bank's decision on Thursday to cut interest rates, CEO Bonnafe said that it would spur growth without being a cure-all.

"(The rate cut) is a positive sign. It will not be an answer to all issues but it will be a good help to the economy," he said.

BNP could also end up being a buyer of the state of Luxembourg's 34-percent stake in its BGL subsidiary, added Bonnafe, without giving further details.

Luxembourg, which took a stake in the unit as part of BNP's takeover of collapsed Benelux bank Fortis in 2008, said last month it wanted to sell the stake.

($1 = 0.7649 euros) (Editing by Edwina Gibbs)