BNP Paribas SA, France's largest bank, reported a 42-percent decline in fourth-quarter profit following 589 million euros (US$871 million) of costs linked to turmoil in credit markets.
Net income fell to about one billion euros from 1.72 billion euros a year earlier, the Paris-based bank said yesterday. Earnings fell short of the 1.3-billion-euro mean estimate of five analysts surveyed by Bloomberg News. Full-year profit rose seven percent to 7.8 billion euros, a record for a French bank.
The collapse of the United States subprime mortgage market led to more than US$133 billion of losses and writedowns at the world's biggest financial institutions.
The costs to BNP Paribas were dwarfed by the US$14 billion of writedowns announced yesterday by UBS AG, Switzerland's largest bank, and less than those of French rivals Societe Generale SA and Credit Agricole SA.
"Of all the French banks we follow, we prefer BNP Paribas, whose corporate and investment bank operations appear to be showing the greatest resistance to the current market turmoil," Jean-Pierre Lambert, an analyst at Keefe, Bruyette & Woods Ltd, told clients.
BNP Paribas shares fell 1.1 percent to 67.84 euros at 9:55am in Paris trading. On Tuesday they rose 2.9 percent and Societe Generale gained 10 percent on speculation the French government is trying to arrange a merger.
Societe Generale last week reported 2.05 billion euros of subprime-related writedowns and said unauthorized trades cost it an additional 4.9 billion euros, the largest trading loss in banking history. Profit for 2007 fell to as little as 600 million euros from 5.2 billion euros in 2006.
"BNP Paribas seems to have weathered the crisis fairly well, with more limited writedowns compared to peers," Kian Abouhossein, an analyst at JPMorgan in London, wrote in a note to clients.
BNP Paribas took 456 million euros in provisions linked to a rise in counterparty risk for bond insurers. The bank also wrote down the value of securities and loans committed to leveraged buyouts by a total of 96 million euros.
Banks bought credit-default swaps from financial guarantors such as ACA Capital Holdings Inc to guard against losses on mortgage-linked securities, and then later bought protection for the possibility those guarantees may be worthless as defaults surged.
BNP Paribas said loan reserves and write-offs cut earnings by an additional 309 million euros, including 171 million euros at its US unit BancWest.