BNP Paribas, France’s biggest listed bank, ruled out a capital increase to meet tougher industry rules and promised a positive end to the year, boosting investor confidence in the banking sector.
French bank stocks have lagged peers for much of the year over concerns they lack the capital strength to meet incoming capital regulations known as Basel III. But sentiment is turning after forecast-beating results from BNP and rival Societe Generale.
Falling loan provisions and strong retail banking exposure helped the two beat third-quarter forecasts despite a sluggish quarter for investment banking that hurt rivals Credit Suisse, Nomura and Morgan Stanley.
Both BNP and SocGen have also said their own profit generation would be enough to comply with the Basel requirements ahead of the 2019 deadline, ruling out the need for a capital increase.
BNP chief executive Baudouin Prot said BNP would outdo SocGen under Basel III with a core Tier 1 ratio “better” than 7.5 per cent by January 2013. “[There will be] no capital increase whatsoever... I’m very confident on the capital position,” Prot said.
BNP, Europe’s third-biggest bank by market value behind HSBC and Banco Santander, said its Tier 1 ratio at the end of 2012 would overall be unchanged. It is currently nine per cent. The bank also said the shift to new Basel capital requirements would add a total of €70bn (£61bn) to its risk-weighted assets.
BNP reported net income of €1.9bn, up 46 per cent year-on-year. Revenue, which was forecast to fall slightly, rose 1.8 per cent. Prot said corporate and investment banking held up well despite a sluggish quarter – revenues at the unit fell 17 per cent – while retail rebounded “strongly”.
City A.M. Reporter