Largest French Bank Escapes Much of Subprime Turmoil
- Feb 21, 2008
Paris–France’s biggest bank, BNP Paribas SA, posted a 42 percent fourth quarter profit drop due to the reduced value of securities damaged by the troubled credit markets–but BNP Paribas fared better than many other European banks in the subprime breakdown, Bloomberg reports.In line with estimates BNP Paribas released in late January, net income declined from 1.72 billion euros in 2006 to 1.01 billion euros ($1.47 billion). The bank wrote down 589 million euros on leveraged loans and debt backed by bond insurers; it also earmarked 309 million euros connected with U.S. loans and securities.However, BNP Paribas’ subprime-related expenses of 1.2 billion euros didn’t come close to the writedowns of other European banks, including French competitors Societe Generale SA and Credit Agricole SA and Europe’s largest bank, UBS AG–which posted a loss of $18 billion.Despite the fourth quarter writedowns, BNP Paribas–one of the first banks to publicize the credit market collapse in August when it froze three funds because it couldn’t price all of their securities–actually showed a record profit for a French bank in 2007 of 7.8 billion euros.The world’s largest financial institutions have lost $145 billion in writedowns and loan losses related to U.S. subprime mortgage defaults. As bond insurance weakens, they may face an extra $203 billion in writedowns, according to UBS analyst Philip Finch.