BNP BNP Paribas

   By Pietro Lombardi 
 

Shares in BNP Paribas SA trade higher after the French bank delivered a set of first-quarter results that some analysts see as a proof of its resilience.

France's largest listed bank by assets warned that the coronavirus pandemic may reduce profits this year by up to a fifth from last year. It vowed to further cut costs after its first-quarter profit fell by a third as it set aside more money to cover potential soured loans and disruption sparked by the pandemic wiped out revenue from its equities-trading division.

The increase in loan-loss provisions is consistent with steps taken by many large banks in Europe and the U.S. as the banking industry braces for the economic impact of the coronavirus. The equities rout echoes a similar trend at French peer Societe Generale, which last week posted a surprise loss after soaring bad-loan charges and a collapse in stock-trading revenue.

BNP said Tuesday that net profit for 2020 may fall by 15% to 20% due to the pandemic, the effects of which were already felt in the first quarter. The lender will increase its efforts to cut operating expenses, but this could be offset by growing provisioning.

The outlook is better than consensus estimates, analysts said.

"The optimistic outlook statement relative to expectations may support the shares initially but we would expect this to fade as focus shifts to worse-than-expected capital and a lack of provisioning in all but the corporate bank and consumer credit," Barclays said.

BNP shares rose 5.8% at 0826 GMT. The stock is down roughly 46% so far this year.

"At the end of a quarter supported by an excellent business drive, in line with its 2020 objectives, the results of BNP Paribas for the first quarter 2020 were impacted by the harshness of the health crisis," Chief Executive Jean-Laurent Bonnafe said. "The good resilience of revenues and results despite this shock demonstrates the robustness of the group's diversified and integrated model."

The bank set aside 1.43 billion euros ($1.56 billion) to cover bad loans, more than a third of which related to the pandemic. This is an 85% increase on year.

The higher provisions, coupled with lower revenue, led to a 33% decline in net profit to EUR1.28 billion. Revenue fell 2.3% to EUR10.89 billion.

"Underlying results were resilient," Jefferies said.

The pandemic dealt a EUR568 million blow to the bank's top line, related to two one-off impacts in its equities and insurance businesses.

Equities revenue in particular collapsed, with the business posting a loss of EUR87 million in the quarter--from revenue of EUR488 million a year earlier--as it was "badly hit by the sharp falls in European markets at the end of March," it said. The restrictions imposed by European authorities on 2019 dividends resulted in a hit to revenue of EUR184 million, it said.

Fixed-income revenue rose around 35%.

BNP's core Tier 1 capital ratio--a key measure of capital strength--was 12% in March compared to 12.1% in December.

"This set of results showed the resilience of the group CET 1... and the benefit of a diversified business," Citi said.

Write to Pietro Lombardi at pietro.lombardi@dowjones.com

(END) Dow Jones Newswires

May 05, 2020 05:27 ET (09:27 GMT)

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