BNP Paribas takes investment banking knock in Q2

AP News
Posted: Aug 02, 2012 9:39 AM
BNP Paribas takes investment banking knock in Q2

PARIS (AP) — A downturn in BNP Paribas' corporate and investment banking division contributed to a 13.2 percent fall in the French bank's second-quarter net profits to €1.8 billion ($2.2 billion).

France's largest bank said Thursday that revenue slumped 8 percent to €10.1 billion as institutional clients pulled back business in light of the uncertainty of Europe's debt crisis and the global economic slowdown. Revenue at the investment banking arm fell 23.6 percent over the second quarter last year.

"Against a general background of crisis in the capital markets and strong volatility, there was less demand from clients," the company said in a statement.

But the revenues still came in higher than the average predicted by analysts surveyed by FactSet of €9.9 billion.

That boosted the stock in morning trading on the Paris bourse, but shares slid after the European Central Bank left interest rates unchanged at a meeting Thursday afternoon. Many had hoped the bank would lower rates to boost the economy.

In late trading, the stock was down 0.7 percent.

Europe's banks have been particularly squeezed by the continent's debt crisis. They often hold large amounts of government bonds, whose value has plummeted as countries have either gone bankrupt or teetered on the brink.

In addition, just as their balance sheets were taking a hit, banks were asked by European regulators to increase the quality of the assets they hold, so they can better weather any storms ahead. As they tucked away more money, banks sometimes struggled to come up with enough cash to fund their day-to-day operations. In particular, as U.S. investors grew wary of Europe's crisis, the banks often found it hard to get dollar funding.

But BNP Paribas said Thursday that it had improved its cash reserves. It now has €200 billion in immediately available reserves, which the bank said satisfies nearly all of its short-term wholesale funding needs.

That figure includes €92 billion in deposits at central banks — of which $29 billion is at the U.S. Federal Reserve — and €108 billion in other assets that the bank calls "unencumbered" and could be placed at central banks.

The bank noted it had nearly achieved the 9 percent ratio of good assets to risky ones that new international banking regulations will require by the end of the year.