BNP Paribas Q2 net profit up 6.6 percent

PARIS — French bank BNP Paribas said Tuesday its net profit rose 6.6 percent in the second quarter as its retail and investment banking divisons succeeded in attracting new business amid the continued global economic downturn.

The Paris-based bank reported net profit of euro1.6 billion ($2.3 billion) in the three months ended June 30, up from euro1.5 billion a year earlier.

BNP Paribas, Europe’s largest financial institution by deposits, said its Tier 1 ratio, seen as a key measure of a bank’s financial health, was 9.3 percent on June 30, up from 8.8 percent on March 31.

In a statement, BNP Paribas Chief Executive Baudoin Prot said the bank “is well positioned to take on the challenges of the current economic environment.”

The bank’s revenue rose nearly 33 percent in the quarter to euro10 billion, thanks in part to the acquition of Belgian lender Fortis Bank. Excluding this acquisition, BNP Paribas revenue rose 20 percent in the quarter.

BNP Paribas credited its second quarter performance to “the very good operating performance of all divisions despite a high cost of risk,” which remained around the same level as the first quarter.

The corporate and investment banking division, the bank’s largest and most profitable unit, saw operating income rise to euro1.14 billion in the quarter from euro510 million a year ealier, when investment banking profits were hammered by the global financial crisis.

The bank said its fixed income unit’s profits were “extremely strong” in the quarter due to investor demand and a continued favorable market environment.

BNP Paribas shares rose nearly 50 percent on the back of a broad rally in equity markets in the second quarter. So far this year, the shares are up 8 percent.

In a separate statement Tuesday, BNP Paribas said it has agreed to buy out partner Intesa Sanpaolo from their Findomestic Italian consumer finance subsidiary.

BNP is to buy half of its Italian partner’s stake this year for euro500 million, the bank said, with the remainder to be bought between 2011 and 2013 at a price between euro350 million and euro650 million.

BNP said that its integration of Belgium’s Fortis Bank began during the second quarter and that an evaluation of the synergies and restructuring costs would be unveiled at a presentation to investors in December.

The bank’s acquisition of Belgium’s leading lender earlier this year made BNP Paribas the Euro zone’s largest bank by deposits, with more the euro540 billion, ahead of number two ING with euro520 billion, and well ahead of French rival Societe Generale with euro265 billion.

Fortis ran into trouble during the financial panic last fall as investors doubted it could both handle investments losses and repay the massive debt it incurred in buying parts of ABN Amro of the Netherlands.

Facing a run by depositors, Fortis struck a deal with the Dutch, Belgian and Luxembourg governments to save the company from bankruptcy. The governments carved it up along national lines.

Last month, cross-town banking rival Societe Generale SA said that its second quarter net income will be “slightly positive” thanks to its corporate and investment banking units. The bank said its overall net income will be hit by a euro1.3 billion ($1.82 billion) writedown from credit default swaps and debt instruments. The global financial crisis has led to major losses on risky securities at banks worldwide.

Societe Generale is scheduled to report its own second quarter earnings on Wednesday.