In all, the financial crisis cost the French major about €1.7bn in provisions and asset writedowns, excluding €123mn of gains from its own debt BNP Paribas said on Wednesday that its third-quarter profit slumped 56%, as provisions for risky loans shot up in the wake of the collapse of Lehman Brothers and the worsening of European economies.

France’s biggest bank said that net income declined to € 901mn (US$1.17bn) from € 2.03bn in the same period a year earlier. Earnings fell short of the € 1.38bn median estimate of analysts.

In all, the financial crisis cost BNP Paribas about €1.7bn in provisions and asset writedowns in the third quarter, excluding €123mn of gains from its own debt.

Profit before tax at BNP Paribas’ investment bank fell to €38mn from €760mn a year before. The unit, which increased revenue by 4.6%, had €1.03bn of loan provisions and €289mn of asset writedowns.

Overall, provisions for risky loans soared to €1.99bn from €462mn, BNP Paribas said, almost triple the €700mn estimate of analysts. The asset-management and investment-banking units took €512mn of charges related to Lehman, which went bankrupt on Sept. 15.

The investment banking division also set aside €462mn tied to debt backed by US bond insurers, and €83mn for risks linked to Iceland’s banks.

Pretax profit at BNP Paribas’ asset management unit dropped 71% to €134mn, missing the €411mn estimate of analysts. The unit added a net €7.4bn in the quarter from client investments.

Pretax earnings at the French retail network rose 5.5% to € 385mn, matching analysts’ estimates.

Pretax earnings at Bancwest, the US consumer-banking unit, fell to € 50mn from € 171mn a year earlier. That missed the € 128mn estimate of analysts.

Pretax earnings at the Italian retail network BNL, acquired in 2006, rose 12% to € 164mn, missing analysts’ € 180mn estimate.

BNP Paribas’ Tier 1 ratio, a key indicator of financial health, stood at 7.6% at the end of September. Including the effects of the Fortis purchase, that measure would be close to 8%.

BNP Paribas’ shareholders equity rose 9.6% since the beginning of the year to € 40bn at the end of September, excluding effects from the Fortis acquisition. Capital will be bolstered by selling € 2.55bn of subordinated debt to the French government.

Like Paris-based competitor Societe Generale, BNP Paribas too decided not to use new accounting rules that are less stringent on markdowns.

The French bank fell € 1.5, or 2.6%, to € 57 by 9:25 a.m. in Paris. The stock has declined 23% so far this year. Societe Generale, France’s second-largest bank by market value, is down 50% year-to-date.

source: Indiainfoline

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