UPDATE: BNP Paribas 3Q Net Up 46%; Basel III Impact Manageable

BNP Paribas SA (BNP.FR), France's largest bank by market capitalization, Thursday reported a 46% hike in third-quarter net profit as provisions for bad loans continued to shrink and the integration of Belgian bank Fortis gained pace.

The Paris-based lender also said tighter rules for banks' capital requirements, due to be gradually applied between 2013 and 2018, will be manageable without a capital increase.

Although BNP Paribas didn't disclose its core capital ratio target for 2013, Chief Executive Baudouin Prot told reporters he expects it to be significantly above 7%, the minimum level set by regulators.

According to the new rules, known as Basel III, banks will have to hold at least 7% of top quality capital in reserve as a cushion against any future financial crises.

Nomura analyst Jon Peace, who has estimated the bank will have a core Tier of 9% on Jan. 1, 2013, said this "should put capital increase concerns completely aside for BNP Paribas and act as a strong catalyst for the stock.

At 0920 GMT, BNP Paribas shares were up 3.9% at EUR54.50, outperforming the wider market, which was up 1.9%.

The phasing in of new international banking rules has sparked concerns about the ability of some lenders to comply with the stricter requirements, particularly as three European banks--Germany's Deutsche Bank AG (DB), U.K.-based Standard Chartered PLC (STAN.LN) and Spain's Banco Bilbao Vizcaya Argentaria SA (BBVA)--have launched rights issues.

Societe Generale SA (GLE.FR), France's second-largest lender after BNP Paribas, Wednesday said it will be able to achieve a 7.5% core Tier 1 ratio in early 2013 without raising fresh capital.

BNP Paribas's net profit in the three months to Sept. 30 increased to EUR1.9 billion from EUR1.3 billion a year earlier, beating analyst expectations of EUR1.72 billion.

Revenue in the quarter rose 2% to EUR10.86 billion from EUR10.66 billion in the same period in 2009, as retail banking and asset management offset a decline in investment banking.

Investment banking revenue dropped 17% to EUR2.87 billion compared with the third quarter of 2009, but rose 7% from the previous three months.

Provisions for bad loans continued to fall as the economy recovered, declining 47% to EUR1.22 billion in the quarter.

Synergies from the integration of Fortis were EUR292 million in the first nine months of 2010, bringing the total to EUR612 million, six months ahead of schedule.

BNP Paribas took over the retail assets of the Belgian bank in 2008, in a move that widened its footprint to Belgium and Luxembourg with around 1,450 branches and further cemented its ranking as one of Europe's largest banks.

BNP Paribas's Tier 1 capital ratio--a key measure of a lender's capital strength, consisting of equity, preferred shares and retained earnings--rose to 11.2% at the end of September, compared with 10.1% at the end of 2009.

The core Tier 1 ratio, which consists of only top-quality capital such as equity and retained profits, was 9%.

Turning to BNP Paribas's prospects beyond the third quarter, Prot said he remains confident about the bank's overall performance in the fourth quarter.

BNP Paribas said Basel III regulation would increase risk-weighted assets of EUR70 billion before taking into account mitigating effects.

Risk-weighted assets are a bank's assets weighted according to their credit risk. For example, some assets, such as debentures, are assigned a higher risk than others, such as cash. This calculation is used in determining the capital requirements of lenders.

BNP Paribas is the second French lender to report third-quarter results, after smaller peer Societe Generale, and ahead of Credit Agricole SA (ACA.FR), the country's third-largest bank by market value, which reports Nov. 10.

-By Elena Berton, Dow Jones Newswires; +33 1 40 17 17 65; elena.berton@dowjones.com

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