* With a hypothetical 30% tax rate (1.6bn euros before tax).
The Board of Directors of BNP Paribas met on 4 November 2008. The meeting was chaired by Michel Pébereau and the Board examined the Group’s results for the third quarter and the first nine months of 2008.
QUARTERLY PROFITS OF 901 MILLION EUROS DESPITE AN UNPRECEDENTED DEEPENING OF THE CRISIS SINCE SEPTEMBER
All of BNP Paribas’ business units have increasing attractiveness, as proved by its growing customer base, the further growth in commitments towards the economy and the substantial inflows in deposits and assets under management. With the acquisition (1) of the businesses of Fortis Belgium and Fortis Luxembourg, BNP Paribas will expand its pan-European footprint, becoming the Eurozone’s number one franchise by deposit base and increasing its capital base without dilution.
In the third quarter 2008, BNP Paribas made 901 million euros in net profits (group share) despite numerous critical situations in the financial services industry and unprecedented turbulence in the markets since early September. The direct impact of the financial crisis was significantly greater than in previous quarters. The impact on revenues was -507 million euros compared to -230 million euros in the third quarter a year earlier. Gains on own debt were limited to 123 million euros (compared to 154 million euros in the third quarter 2007). The impact on the cost of risk soared from 115 million euros in the third quarter 2007 to 1,194 million euros before tax this quarter, due in particular to the downgrading of monoline insurers to doubtful status and to the collapse of Lehman Brothers and of Icelandic banks.
Despite those deeper effects of the crisis, the Group generated in the third quarter revenues of 7,614 million euros, down only 1% compared to the same period a year earlier and up 1.3% compared to the second quarter 2008. This quarter, BNP Paribas Capital made no capital gains
(-264 million euros compared to the third quarter 2007). However, thanks to the Group’s enhanced attractiveness and the sales and marketing drive carried out by its teams, the revenues of the operating divisions were up 2.4%.
BNP Paribas did not use, in the third quarter 2008, the amendment to the IAS 39 accounting standard authorising the transfer of certain assets that have become illiquid from the trading book to other portfolios.
The Group’s proactive approach to cost management, in particular in those business units most affected by the crisis, has led to a 0.2% fall in operating expenses to 4,635 million euros this quarter compared to the same period a year earlier and an even greater fall of 4.5% compared to the second quarter 2008. For only the operating divisions, operating expenses were down 1.9% compared to the third quarter 2007.
The Group’s gross operating income, 2,979 million euros, was down 2.2% compared to the third quarter 2007 and up 11.8% compared to the second quarter 2008. The operating divisions’ good sales and marketing drive, combined with their proactive cost management efforts, yielded a 9.4% growth in their gross operating income.
The cost of risk soared to 1,992 million euros before tax compared to 462 million euros for the same period a year earlier. This substantial rise is primarily a direct result of the financial crisis (1,194 million euros). Excluding this impact, the cost of risk was 798 million euros, up 451 million euros compared to the third quarter 2007, as a result of the downturn in the economy, notably:
- +172 million euros for CIB with a 133 million euros provision in the third quarter 2008 compared to a 39 million euro write-back for the same period a year earlier;
- +138 million euros for Personal Finance, primarily in consumer lending in Spain and in Eastern Europe;
- +69 million euros for BancWest.
More generally, the Group is benefiting from the relative good positioning of its loan portfolios in their respective markets thanks to the quality and diversity of the corporate client base, to the conservative mortgage origination policy in all markets as well as to moderate exposure to emerging markets.
Again this quarter, all divisions have made a positive contribution to the Group’s pre-tax income, which totalled 1,143 million euros, compared to 2,727 million euros for the same period a year earlier.
For the first nine months of 2008, the Group’s revenues totalled 22,526 million euros (-6.6%). The cost/income ratio, at 62.6%, was up 4.2 points compared to the first nine months of 2007. Net income group share was 4,387 million euros (-35.6%), bringing the annualised post-tax return on equity to 13.1%.
The annualised pre-tax return on allocated equity of the retail banking businesses is 29%, that of AMS 32% and that of CIB 12%.
Earnings per share for the first nine months was €4.7 (-36.8%).
ALL THE OPERATING DIVISIONS HAVE HELD UP WELL IN THE FACE OF THE DEEPENING CRISIS
(1) Subject to the approval of the appropriate authorities