BNP Paribas Profit Halved by Italian Write-Down

PARIS—French bank BNP Paribas SA reported sharply lower fourth-quarter net profit on Friday, hit by a hefty write down on its Italian bank, BNL, and said it planned to trim its corporate and investment bank to meet stricter financial regulation in Europe.

The Paris-based lender, France's largest listed bank by assets, said net profit fell 52% to €665 million ($745 million) in the three months ended Dec. 31, from €1.38 billion a year ago. Revenue increased 3% to €10.45 billion from €10.15 billion in the same quarter last year.

BNP Paribas booked a €917 million write-down in the quarter after European regulators asked the French bank to set aside additional capital for BNL following an intensive review.

The French bank also said it planned to cut risk-weighted assets at its investment bank by €20 billion by 2019 to wind-down "unproductive" assets and "right-size low return activities." About half of the capital freed-up will be reinvested in more profitable and less capital intensive businesses, added the bank.

The target is to achieve average annual growth of 4% for investment banking revenue between 2015 and 2019 and generate €1.6 billion in additional pretax income compared with 2015.

BNP Paribas's results this quarter and its new restructuring plans underscore the enduring pressure on large banks in Europe to continue to increase capital buffers to absorb potential future losses, despite signs of a progressive economic recovery.

The European Central Bank recommended that BNP Paribas raise its core tier one capital ratio to 11.5% by 2019, up from 10.9% in December. A bank's core tier one capital ratio measures its top quality capital such as equity and retained earnings against risk-weighted assets. The ECB can prevent any bank that fails to meet minimum requirements from paying dividends on stock and bonuses to some employees.

This year, the bank said it would pay its shareholders a dividend of €2.31 a share.

Its leverage ratio, another gauge of a bank's financial strength that measures capital held against total assets, stood at 4% in December, above the minimum 3% set by regulators for 2018.

BNP Paribas is the first major French bank to report fourth-quarter earnings. Socié té Gé né rale SA and Cré dit Agricole SA publish their results on Feb. 11 and Feb. 17 respectively.

Write to Noemie Bisserbe at noemie.bisserbe@wsj.com

(END) Dow Jones Newswires

February 05, 2016 01:25 ET (06:25 GMT)

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