BNP Paribas’ shares tumble on US fine fears

 
Tim Wallace
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BNP PARIBAS profits dipped in the first quarter as it set more money aside to cover legal bills, and its Italian business disappointed, the bank reported yesterday.

Pre-tax profits fell 3.7 per cent on the year to €2.5bn.

Revenues slid 0.6 per cent to €9.9bn while operating expenses fell 1.4 per cent to €6.4bn.

But the bank’s cost of risk shot up 19 per cent to €1.1bn, and it warned its provisions to cover litigation costs in the US may be far short of the final bill.

BNP Paribas set aside €798m for litigation around a probe into possible US sanction breaking.

But it warned “a high degree of uncertainty exists as to the nature and amount of penalties that the US authorities could impose.

“There is the possibility that the amount of the fines could be far in excess of the amount of the provision,” the quarterly update said.

By division, one particularly poor performing division was the bank’s Italian unit, BNL. Its profits came in at just €16m – analysts at JP Morgan had forecast pre-tax profits of €82m. Bad loan provisions of €364m in the unit were more than €50m worse than expected.

BNP Paribas was also hit by the industry-wide slow-down in fixed income activity. Corporate and investment banking revenues slid 3.7 per cent to €2.3bn, led by a 21.7 per cent fall in fixed income to €996m.

Its fully-loaded Basel III capital ratio rose 30 basis points on the quarter to 10.3 per cent.

The bank’s shares fell 3.2 per cent on the day.