February 15, 2012 / 6:51 AM / in 6 years

UPDATE 5-BNP bucks trend with positive view on 2012

* Q4 net profit 765 mln euros vs Rtrs poll 574 mln

* 2011 dividend of 1.20 eur/shr, down from 2.10 eur

* Start to year “quite strong” in investment banking - CEO

* 75 pct of Greek debt written down, sees no more in 2012

* BNP shares end up 4.1 pct, vs sector up 1.7 pct

By Lionel Laurent and Matthieu Protard

PARIS, Feb 15 (Reuters) - BNP Paribas, France’s biggest listed bank, sounded an upbeat note on Wednesday, at odds with the tone of many European rivals, and said the euro zone debt crisis appeared to be stabilising.

Chief Executive Jean-Laurent Bonnafe said the outlook had been boosted by an injection of cheap cash by the European Central Bank, part of measures to ease the crisis in the 17-country union, and he believed Europe would escape recession, a sentiment supported by figures from leading European economies.

The bank gave no official targets but told analysts that business trends would be much better this year than in the second half of 2011.

BNP shares rose as much as 7 percent during the day, buoyed by the bank’s early delivery on tougher capital targets and by fourth-quarter results that were not as weak as expected.

“I‘m reassured on capital ratios, I‘m comforted by the fact that they are managing the asset sales well,” said Marco Bruzzo, head of Mirabaud Gestion AM. “Even if operationally the fourth quarter was slightly disappointing, it should pick up, especially in the second half of 2012.”

BNP also said it would pay a 2011 dividend, albeit reduced to 1.20 euros from 2.10 a year ago, in contrast to domestic rivals Societe Generale and Credit Agricole, which both scrapped theirs.

Europe’s sovereign debt crisis and volatile financial markets have taken a big bite out of European banks’ profits, particularly at their bond trading operations. Deutsche Bank and Credit Suisse ended 2011 with quarterly losses, while Britain’s Barclays posted its worst quarter for three years.

BNP ended 2011 with a 50.6 percent drop in quarterly net profit to 765 million euros ($1 billion), hurt by 567 million in new Greek write-downs, but one-off gains and retail banking helped BNP beat forecasts, and it is seeing signs of improvement for this year, its chief executive said.

“The beginning of the year has been quite strong in investment banking ... (We see) some kind of stabilisation of the euro zone situation,” Bonnafe said in an interview with Reuters Insider TV.

Shares in BNP ended the day up 4.1 percent at 34.89 euros, outperforming a 1.7 percent rise for the STOXX Europe 600 bank index. Rival SocGen, which reports results on Thursday, closed up 2.2 percent.


While the writing is on the wall in some respects for BNP’s investment bank this year, which faces 850 million euros in extra one-off costs and 1.4 billion euros in lost recurring revenue as a result of restructuring and asset sales, management said a broader market turnaround was in the works.

“We see clients coming back to BNP Paribas ... Globally my feeling is the trend will be much better in 2012,” Co-Chief Operating Officer Georges Chodron de Courcel told analysts. “We will not come back to 2010, but probably we will deliver a much better situation than in the second half of 2011.”

BNP is also expecting a drop in overall loan-loss provisions this year now that it has written down 75 percent of Greek debt. CEO Bonnafe told Reuters Insider he was confident there would be no more Greek charges in 2012.

The bank is to present a 2013 growth and development plan that will update its target for return on equity, which had been 15 percent before the euro zone crisis triggered several cutbacks in the banking sector, Bonnafe said.

“It is unlikely that banking systems will have the same return on equity as before,” said Bonnafe, who succeeded Baudouin Prot, now chairman, as CEO in December.

He also said bonuses would be cut in half.


Bonnafe is juggling asset sales, job cuts, higher capital requirements and a funding crunch that pushed the European Central Bank to offer the region’s banks injections of cheap, long-term cash.

In the Reuters interview, the CEO described the ECB’s three-year lending facility as a “smart move” and said investors were taking a fresh look at the ailing euro zone. BNP has used the facility and will do so again if circumstances permit, he added.

BNP said it had cut its cash balance sheet excluding certain activities by 12 percent in 2011 to 965 billion euros, allowing it to hit an end-2011 core Tier 1 ratio of 9.2 percent under tougher rules set by European regulators. The deadline set to reach 9 percent is June 2012.

“The concern here is that BNP is still facing operational headwinds as it delevers (revenues are 1 percent lower compared to 3Q11 and in line with estimates),” Espirito Santo Investment Bank said in a research note.

Analysts at Citigroup said the group’s core profit was 5 percent below their forecasts due to weakness in wealth management and insurance as well as French retail.

The bank meanwhile is stepping up its debt-reduction plans. Its investment-banking division is now targeting a $65 billion cut in U.S. dollar funding needs by end-2012, from $60 billion. Asset sales and restructuring costs will cost the unit 850 million euros in one-off charges in 2012, it said.

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