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BNP Paribas profit increases 21 percent

BNP Paribas SA reported a 21 percent increase in third-quarter profit, beating analysts' estimates, on higher fees from managing money and the sale of a stake in Bouygues SA's mobile-phone unit.

Net income rose to €2.03 billion ($2.97 billion) from €1.68 billion a year earlier. BNP Paribas said writedowns and risk provisions linked to the collapse of the U.S. subprime mortgage market reduced earnings by €301 million, with the bulk of the losses affecting loans for leveraged buyouts. The bank's writedowns were dwarfed by those of UBS AG and Deutsche Bank AG in Europe, as well as Merrill Lynch & Co. and Citigroup Inc. in the U.S.

"The group enjoys a broad mix of well-positioned businesses which help it to resist in more difficult times," Chief Executive Officer Baudouin Prot said. The 10 biggest banks and securities firms wrote down a combined $30 billion in the quarter after record foreclosures on U.S. home loans to borrowers with poor credit histories rattled debt markets. New York-based Citigroup Inc., the largest U.S. bank, said this week it may face as much as $11 billion in additional writedowns, while UBS AG of Zurich last week reported its first loss in almost 5 years.

Morgan Stanley, the second-biggest U.S. securities firm, said yesterday that it had losses of $3.7 billion on subprime mortgage-related assets in the two months through Oct. 31, adding that the outlook for credit markets is bleaker than in September. BNP Paribas's shares declined 15 percent this year, valuing the bank at €64 billion.

Societe Generale SA, France's second-largest bank by market value, has fallen 18%. Paris-based Societe Generale yesterday said third-quarter profit fell 12 percent on writedowns linked to the subprime contagion.

At BNP Paribas, profit before tax from asset management jumped 35 percent to €485 million as the amount of money the bank oversees rose to €590 billion, a 12 percent increase from a year earlier. Assets fell from the second quarter as investors withdrew €4.1 billion from its money-market funds, the bank said.

Earnings at the French consumer bank rose 2.2 percent to €417 million, while pretax profit at BNL, the Italian unit purchased last year for about €9 billion, climbed 36% to €146 million.

Profit at BancWest Corporation, BNP Paribas's U.S. bank, fell 30 percent to €172 million because of higher provisions for bad loans. The bank set aside €18 million against lending to defaulted U.S. mortgage lenders as well as a 50 million-euro cushion for bad loans to the U.S. construction industry.

BancWest has "very limited exposure to the subprime market," BNP Paribas said in a presentation on its Web site. Subprime borrowers accounted for $155 million of BancWest's $13.3 billion of loans at the end of September. It also held $275 million in subprime mortgage securities in an investment portfolio.

BNP Paribas got caught up in the credit market seizure during the third quarter when it froze three of its funds on Aug. 9, saying it could no longer find prices for some of the securities they held. The European Central Bank pumped money into the market as overnight borrowing rates soared. BNP Paribas re-opened the three funds between Aug. 28 and Aug. 30.

Source: Bloomberg
Date: 08.11.2007 [137]

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