France's biggest listed bank BNP Paribas reported a 72% slide in quarterly earnings on Thursday after booking a bigger-than-expected 2 billion euro ($2.8 billion) charge on Greek debt and sold billions in eurozone bonds to cut risk.
The charge equated to 60% of BNP's sovereign exposure to the crisis-hit Greek economy and reflected last month's pledge from private-sector creditors to write off a bigger chunk of their Greek debt, the bank said in a statement, though it added the plan was still "shrouded by uncertainty".
Describing the bank's Greek provisioning as adequate for the time being, BNP Chief Executive Baudouin Prot nonetheless did not rule out a Greek sovereign debt default, telling Reuters Insider TV it would be "unpleasant" but manageable.
Separately, Dutch financial services group ING Group said it would cut 2,700 jobs at its Dutch banking operations to cope with a deteriorating market, which led to Greek and other impairments.
BNP's big balance sheet, its dependence on wholesale funding markets and its overwhelming European exposure make it among the most vulnerable to the eurozone sovereign debt crisis.
Following a sharp share-price drop in the summer, the bank has announced sweeping asset sales that will be accompanied by job cuts, mainly at its corporate and investment bank, BNP's Prot said.
Banks such as JPMorgan Chase and Credit Suisse are shedding jobs worldwide as stricter regulations and a tough trading environment take their toll on investment banking units in particular.
The impact of disposals and the reduction in U.S.-dollar funding needs — down by $20 billion in the third quarter and due to go down by the same amount in the fourth — will lead to one-off losses of 1.2 billion euros, BNP said.
On an annual recurring basis, gross operating income will fall by 750 million.
BNP's Frankfurt-listed shares were down 2.8%. The bank's Paris-listed shares are down 44.5% since the end of June, against a 27.8% fall for the STOXX Europe 600 bank index and a 57% fall for smaller domestic rival Societe Generale.
EUROZONE DEBT SLASHED
Third-quarter net profit at BNP fell by 71.6% to 541 million euros, compared with a 991.9 million mean estimate of nine analysts polled by Reuters. Revenue fell 7.6% to 10.0 billion compared with a mean estimate of 10.48 billion.
The results bore the scars of a volatile quarter, with corporate and investment bank revenue down 39.8% to 1.75 billion euros. Capital-markets pretax profit was almost completely wiped out, while wealth and asset management pretax profit fell by nearly 50% in the quarter.
However, BNP's strong exposure to retail banking benefited from revenue and credit growth in western European markets and others like Turkey. Retail pretax profit rose by 22.8%.
In addition to taking a Greece charge of 2.26 billion euros, BNP also booked extra losses after slashing its exposure to eurozone sovereign debt by 20.7% to 58.6 billion euros.
The bank cut its banking-book exposure to Greek sovereign debt to 1.6 billion from 3.5 billion at end-June; Spanish holdings fell to 0.5 billion from 2.7 billion; exposure to Italy slid to 12.2 billion from 20.5 billion.
BNP's quarterly numbers were peppered with other one-offs, including a revenue gain of 786 million euros on widening spreads on BNP's own debt and a 299 million-euro writedown on its 5.2% stake in Europe's No. 2 insurer AXA .
The bank's core Tier 1 ratio, a closely watched metric of lenders' loss-absorbing capital, stood at 9.6% at end-September, unchanged from end-June.
