'Exceptional turbulence' hits BNP

France's biggest bank plans to spend billions on acquisitions to boost earnings

PARIS, France -- BNP Paribas, the euro zone's biggest bank by market value, said second quarter profit fell because of "exceptional turbulence" in the financial markets.

France's biggest bank said net income dropped 13 percent to 1 billion euros in the second quarter of 2002.

BNP Paribas -- which plans to spend between 5 billion and 9 billion euros on acquisitions by 2005 to boost profits and reduce its reliance of investment banking -- saw its stock fall 2.7 percent to 45.96 euros after it issued results two weeks ahead of schedule.

"In view of the exceptional turbulence currently affecting financial markets, BNP Paribas has deemed appropriate to give preliminary indications on its level of results for the second quarter of 2002 as soon as it had completed the initial phase of its account consolidation process,'' the bank said in a statement.

For the three months ended June 30 net banking income, or revenue, dropped 6 percent to 4.1 billion euros. The profit and revenue figures fell short of preliminary analysts expectations compiled by Reuters.

BNP said poor market conditions in June had adversely affected revenue at its corporate and investment banking business.

MORE STORIES • BNP delivers robust profits   • Weak markets knock BNP earnings  • BNP plans 3-year buying spree

"This is a revenue warning,'' a Paris-based analyst told Reuters. "It is not clear what the precise problem is but you can expect this to weigh on the French banks today. It is a bad surprise.''

The company's stock hit record high of 61.30 euros in May as many analysts and investor thought the bank had cushioned itself against weak market conditions with its reliable retail banking business. But the bank has lost a quarter of its value as markets ploughed lower and concerns grew about French banks' exposure to the country's troubled corporations, like Vivendi Universal, France Telecom and Alcatel.

BNP Paribas said on Thursday it would set aside 300 million euros for possible bad debts.