PARIS - French bank BNP Paribas reported unexpectedly strong first-quarter earnings on Thursday, underpinned by a solid performance in domestic retail banking and a far steeper-than-expected drop in risk provisions.
In the bank's first earnings report under IFRS accounting standards, it said net profit in the first quarter was at 1.72 billion euros (2.2 billion dollars), up 56.4 percent from a year earlier.
Gross operating profit rose by 36.5 percent to 2.6 billion euros.
The figures surprised analysts, whose forecasts had ranged from 1.13 billion to 1.5 billion euros for net profit and from 1.83 billion to 2.2 billion euros for operating profit.
The outcome was boosted by a capital gain from the sale of shares in French construction group Eiffage but also by a 19.3 percent rise in net banking income to 5.6 billion euros.
But it was the level of provisions which most confounded predictions, with BNP adding that it was operating in a "still favourable credit risk context".
It said the cost of risk in the quarter fell by 62.4 percent from last year to just 103 million euros, compared with analysts' forecasts ranging from 202 million euros, up to JP Morgan which expected a modest increase at 279 million.
That performance came largely owing to an unexpected gain of 47 million euros at the group's corporate and investment banking division, against charges of 52 million last year. The CIB activities posted revenues up 9.9 percent at 1.57 billion euros and gross operating earnings up 14.4 percent at 653 million.
BNP chief executive Baudoin Prot said the bank's performance in the first quarter had "outperformed the market across many business lines".
The bank also announced plans to buy back 600 million euros' worth of shares this year.
Group operating expenses and depreciation were up some 8.6 percent from a year earlier, but this should be seen in light of a recruitment drive which has brought in 2,400 new staff since the start of the year.
Shares in BNP Paribas led the Paris market upwards, surging after publishing the consensus-busting first-quarter results.
BNP Paribas shares were 4.42 percent higher at 54.40 euros in late morning trading, while the CAC 40 index was was up 0.90 percent.
The surge rippled through other banking stocks, sending Societe Generale up 2.55 percent to 78.50 euros, its highest level in a year, Credit Agricole up 2.18 percent at 21.05 euros and Dexia up 1.01 percent at 17.98 euros.
A dealer at a large US investment bank said BNP's figures were "better than expected, mainly due to lower loss provisions and the private equity unit".
The dealer added the group's announced 600-million-euro buyback target for 2005 was "not expected".
Deutsche Bank analysts said first quarter results "impressed in a number of ways", notably because of some 450 million euros of capital gains, "high trading profits" and write-backs provisions in the corporate and investment banking division.
"Corporate and investment banking was also very strong in both businesses, thanks to good fixed income, derivatives and structured finance businesses," they said, maintaining their 'buy' rating on the stock.
05/12/2005 11:39 GMT