Weak markets knock BNP earnings

PARIS, France -- BNP Paribas, France's biggest bank, posted a 19 percent drop in profit as it set aside money for bad loans and continued to experience a investment banking slump.

Net income in the first three months to March 31 fell to 1.02 billion euros ($940 million) from 1.25 billion euros a year ago, the company said in a statement. Net banking income was little changed at 4.42 billion euros.

The Paris-based bank managed to deliver slightly better than expected numbers on steady income from its consumer banking business, which cushioned it from the weakness in equity markets.

Michel Pebereau, BNP Paribas' chief executive said: "Despite an economic and financial environment still as difficult as in the second half of last year, BNP Paribas Group's results ... were particularly high for our bank."

"Retail Banking's businesses enjoyed the best quarter in their history... while Corporate and Investment Banking's performance was a little sluggish, it is one of the players in Europe that has held up the best and remains highly profitable despite a downturn in the market environment."

Many of its rivals, like Deutsche Bank (DBK), rely more heavily on volatile investment banking income, which has waned over the last 12 months because of weak demand from companies for mergers, acquisitions and stock market listings.

BNP (PBNP), like its French rivals Societe Generale (PGLE) Credit Lyonnais (PCL) and Credit Agricole, has become popular among the investors because it is less exposed to falling stocks markets and investment banking. Its stock has risen 15 percent this year.

Pretax profit at its retail banking rose 5.5 percent to 633 million euros, while corporate and investment banking pretax profit came in at 498 million euros, down 25 percent.

BNP's results also received a knock from its decision to increase the amount of money for possible bad loans by almost 34 percent to 300 million euros. Many European banks have increased the amount of money they are setting aside for bad debts, including exposure to bankrupt U.S. energy trading group Enron and Argentina's economic crisis.