BNP Paribas, France's biggest listed bank, beat forecasts for first-quarter revenue and earnings, driven by strong retail growth and resilient investment banking that bolstered investor confidence. BNP's European retail footprint helped offset weaker capital market revenue amid market jitters over eurozone debt levels, Arab world unrest and the Japanese earthquake.
"I am still in a cautiously optimistic mood. I expect this level of sustained activity to continue over the next quarters," chief executive Baudouin Prot told Reuters Insider television on Wednesday. BNP shares were up 2.6 percent at 0800 GMT, the top gainer on the STOXX Europe 600 bank indexand lifting smaller domestic rivals Credit Agricole and Societe Generale which report results later this month.
French bank stocks have traded at a discount to peers because of worries over the impact of tougher incoming capital requirements and exposure to eurozone debt jitters. "BNP's performance is above expectations across all the operating divisions," said Natixis analyst Alex Koagne, who has a "buy" rating on the stock.
BNP's quarterly net income rose 14.6 percent to 2.62 billion euros ($3.9 billion), compared with a forecast for 2.25 billion in a Reuters poll. Revenue grew 1.3 percent to 11.7 billion euros, also higher than expected. Retail banking was buoyed by loan growth across western Europe and appetite for mortgages in France. Provisions against loan losses tumbled almost a third across the group, helping BNP's investment bank profit better resist a 14.5 percent drop in capital markets revenue. European peers including Barclays, Credit Suisse and UBS, saw investment banking profit fall 15-30 percent in the first quarter. BNP's unit reported a 5 percent fall in pretax earnings.
BNP, which is relying on its own profit power to meet incoming Basel III capital rules, should see business activity at this level for the coming quarters and significantly lower provisions for 2011 compared with 2010, Prot told Insider. The group's core Tier 1 capital ratio, a key measure of financial strength, rose to 9.5 percent at end-March, from 8.3 percent a year ago.