BNP Paribas sees profit dip, SG bid talk swirls

PARIS (Reuters) - BNP Paribas, France's biggest listed bank, said it expected fourth-quarter profits to be lower than a year earlier as rumors swirled that it may pounce on weakened rival Societe Generale.

BNP Paribas estimated that its 2007 fourth-quarter net profit would fall 41.8 percent from last year to 1 billion euros ($1.48 billion), while its gross operating profit would decline by 7 percent to 2.2 billion.

It also proposed a 2007 dividend of 3.35 euros per share, up 8 percent from last year.

In line with other top banks, BNP Paribas said the global credit crunch had affected its earnings. On Wednesday, Swiss bank UBS posted an $11.5 billion loss.

BNP Paribas said the crisis had an impact of 309 million euros on its cost of risk during the fourth quarter.

It also revealed a 456 million euro fourth-quarter impact from its exposure to monoline insurers. These are companies that insure against the risk of a bond or another security defaulting and have been hit by the credit crunch.

"Despite the severity of this crisis, BNP Paribas is pursuing its development drive and confirming its leading positions," Chief Executive Baudouin Prot said in a statement.

Investment bank Keefe, Bruyette & Woods Ltd (KBW) also said BNP Paribas' fourth-quarter numbers were solid, given the difficult market environment.

"In spite of these writedowns, we believe this to be a reassuring set of results," it said, keeping a "market perform" rating on BNP Paribas shares.

BNP Paribas was partly responsible for a slump in world stock markets on August 9 last year after the French bank said it was freezing three investment funds in the wake of the U.S. subprime mortgage crisis.

SOCGEN BID SPECULATION

Although BNP was keen to keep analysts focused on its financial results, many remained fixed on market speculation that BNP Paribas might bid for smaller French rival SocGen, which has been hit by the industry's biggest trader scandal.

BNP Paribas shares were down 2.1 percent at 66.16 euros in afternoon trade, giving it a stock market value of around 60 billion euros. SocGen was up 0.6 percent, giving it a market capitalization of around 37 billion euros.

On January 24, SocGen said it had uncovered massive unauthorized stock trading by one of its employees that led to a loss of 4.9 billion euros.

SocGen's problems have made it vulnerable to a takeover, and the French government has said it is keen that the bank should remain in French hands.

This has led to renewed speculation that SocGen may end up with BNP Paribas, which made a failed bid for its cross-town rival in 1999.

BNP Paribas has consistently stated in the past that it was not interested in tying up with SocGen.

However, analysts say SocGen's current woes and weakened stock price may encourage BNP to reconsider its position.

BNP said in a presentation on its website that it had a "solid financial situation providing the group with the means to grow".

Investment bank ING said the bank would likely be tempted by SocGen.

"In recent months, BNP Paribas has made it clear that a tie-up with SocGen is not on the agenda. However, we would expect that BNP Paribas' management to be more amenable to a deal now, as SocGen's share price has fallen significantly," ING analysts said in a research note.

BNP Paribas Chief Executive Baudouin Prot told Le Monde newspaper on Wednesday that he had no comment to make on the SocGen speculation.

(Reporting by Sudip Kar-Gupta, Editing by Marie Maitre/ Jason Neely/Rory Channing/Will Waterman)