BNP Paribas reports profit jump

French bank BNP Paris reported a 46-percent rise in quarterly profit on November 04 and assured that it had no need to raise capital to meet new banking standards. The bank provided data suggesting that it would have to raise shareholders' funds by about 6.0 billion euros (8.4 billion dollars) from 2013 to 2018, and would do so by retaining profits.
A key factor behind the profits rise was a big fall in provisions for bad loans. Provisions are money set aside for possible problems, thereby reducing declarable profit, but when unused they are clawed back and boost profit. Many banks, having written down the value of assets at the height of the financial crisis, then made big provisions for loans possibly turning sour during the economic downturn last year.
Another factor behind BNP Paribas figures on November 04 was a strong performance in retail banking. The price of shares in the bank surged by 4.27 percent in early trading to 54.69 euros, the day after French bank shares had risen across the board in response to strong results and a capital assurance from Societe Generale.
The overall French market as measured by the CAC 40 index was showing a rise of 1.83 percent, boosted by a decision by the US Federal Reserve central bank to inject new funds into the US economy. BNP Paris reported that third-quarter net profit rose by 46 percent from the equivalent figure last year to 1.9 billion euros (2.7 billion dollars). Net banking income, a key figure for a retail bank, being the difference between interest paid to attract deposits and interest earned on making loans, rose by 1.8 percent to 10.856 billion euros, higher than expected.
Provisions fell by 46.9 percent to 1.222 billion euros on a 12-month comparison but rose slightly from the figure of 1.08 billion euros in the second quarter. Banks in general are facing possibly having to raise capital to meet new, toughened international standards for the amount of shareholders' funds held in relation to the amount of business and risk taken on, depending on risk categories. The new standards are a response to the financial crisis which nearly broke the banking system in European and the United States.