BNP Paribas Group Announced Results as at 31 December 2008
OREANDA-NEWS On 19 February was announced, that the BoD of BNP Paribas, in a meeting chaired by Michel Pebereau, examined the Group's results for the 4Q 2008, and approved the accounts for the 2008 fiscal year.
THE CAPACITY TO GENERATE PROFITS MAINTAINED IN 2008 DESPITE THE CRISIS
In 2008, in the context of an unprecedented financial crisis, the Group's revenues totalled 27,376 million euros, a limited drop (-11.8% compared to 2007) due to the good resilience of Retail Banking and AMS.
Thanks to cost-cutting measures in all the business units and a substantial reduction in bonuses, operating expenses were contained at 18,400 million euros (-1.9% compared to 2007).
The downturn in the economy, in particular in the United States and in Spain, then in Ukraine, combined with the numerous counterparty defaults in the dislocated financial markets (impact over 2 billion euros for the year), weighed heavily on the cost of risk which totalled 5,752 million euros, or triple the 2007 level. However, the quality of the corporate loan portfolio is still good, with no significant deterioration in 2008 and the household indebtedness ratio in France and in Italy, the Group's two domestic markets, are the lowest in Europe.
Pre-tax income was 3,924 million euros (compared to 11,058 million euros in 2007). These profits stemmed from the ability of Retail Banking and AMS to hold up and to generate return on pre-tax allocated equity of 25% and 28% respectively. CIB posted net losses of 1,189 million euros as a result of the extremely violent market conditions at the end of the year. These losses nevertheless reflect a relative resilience compared to similar activities in other banks.
The net income group share totalled 3,021 million euros (compared to 7,822 million euros in 2007).
CONTRASTING RESULTS IN THE CORE BUSINESSES IN THE FOURTH QUARTER
The fourth quarter was marked by three aggravating factors stemming from the crisis subsequent to the collapse of Lehman:
- a rapidly accelerating decline in equity markets: -19% for the Eurostoxx 50, bringing the fall to -49% for 2008. This plummeting of the equity markets resulted in an impairment charge to the Group's listed investment portfolio (441 million euros) and to the Insurance business unit's accounts (142 million euros);
- unprecedented market dislocation. The drying up of liquidity accentuated the sudden and huge collapse of equity markets, the extremely sharp rise in volatility and correlations between equities and indices as well as a dislocation of usual hedges relations. This accumulation of events unprecedented in magnitude on all markets led to negative revenues of 1,149 million euros in CIB's market-related business. In total, the Group's revenues were down 29.9% compared to the fourth quarter 2007, at 4,850 million euros;
- a very sharp rise in the cost of risk. The deep crisis in the markets resulted in a deterioration of the situation of defaulting monoline insurers (427 million euros in provisions), the defaulting of other market counterparties (304 million euros) and the exposure of the Madoff fraud (345 million euros). In addition, the economic downturn further deepened, in particular in the United States, Spain and Ukraine, triggering a significant rise in the cost of risk at BancWest (283 million euros), Personal Finance (384 million euros) and UkrSibbank (272 million euros). The cost of risk came to a total of 2,552 million euros, up 1,807 million euros compared to the fourth quarter 2007, but the two domestic markets (France and Italy) held up well.
Although operating expenses, rapidly adjusted in all the divisions, were down 8.1% to 4,308 million euros, the Group posted net losses of 1,366 million euros in the fourth quarter 2008 (compared to a profit of 1,006 million euros in the fourth quarter 2007), primarily due to challenges encountered by the CIB division.
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