BNP Paribas profit falls, the bank shifts focus to Germany, Asia

BNP Paribas SA, the largest French bank, said second-quarter profit fell 4.7% as Europe’s economic conditions reduced lending in France and Italy and led to an increase in loan-loss provisions.

Net income fell to 1.76 billion euros ($2.3 billion) from 1.85 billion euros a year earlier, the bank said in a statement today. Earnings compared with the 1.62 billion-euro average estimate of six analysts surveyed by Bloomberg. Revenue lost 1.8% to 9.92 billion euros, while operating expenses declined 0.7%.

BNP Paribas’s leverage ratio, an important indicator of banks financial stability, was 3.4% at the end of June, above the 3% minimum proposed by global regulators for the start of 2018, the bank said. BNP’s common equity Tier 1 ratio under fully-applied Basel III standards climbed to 10.4% at the end of June from 10% three months earlier.

BNP plans to increase personnel by 500 people across its businesses in Germany, where it employs about 3,500 right now, it said today. Last week, BNP acquired for an undisclosed price a unit of Frankfurt-based Commerzbank AG that settles securities transactions and administers funds.

The French bank said in earlier this year that it plans to hire about 1,300 people over three years at its corporate and investment banking and investment-solutions businesses in the Asia region. The financial giant, which currently employs about 8,000 people in those activities in the region, foresees annual revenue growth of 12% through 2016 in Asia.

President Francois Hollande’s government is advising banks to lend more to help France emerge from a recession, while giving them incentives to do it. French banks were spared a split of lucrative investment-banking activities as lawmakers passed a bill this month to segregate proprietary trading, the first such move in Europe. Also, new French regulations are giving the lenders a liquidity boost of 30 billion euros by letting them keep additional client deposits in tax-free accounts on the their balance sheets.

BNP Paribas gained 12% in Paris trading this year for a market value of 59.5 billion euros, the highest among European banks. Societe Generale SA (GLE), France’s No. 2 bank, which publishes earnings tomorrow, rose 7.6% this year.