European bank profits decline, forecasts fall

France's biggest bank BNP Paribas posted a 56 percent fall in third-quarter profits, Allied Irish Banks cut its earnings forecast, and Greece's Emporiki Bank swung to a loss in a sign that the financial crisis is having a profound negative impact on the profitability of financial institutions.
Capital rebuilding continued in the face of a tough outlook as Royal Bank of Scotland looked to raise up to 3 billion pounds ($4.7 billion) from a government-backed bond, and Austria's Raiffeisen Zentralbank said it may ask the government for 2 billion euros ($2.6 billion).
Profits have tumbled across the sector, and several banks have warned of more writedowns and rising bad debts this year, though there is optimism that government rescue packages have left balance sheets strong enough to withstand more losses.
BNP's falling profit told a tale familiar to many banks nursing the bruises of exposure to collapsed investment bank Lehman Brothers, state-rescued U.S. lenders Fannie Mae and Freddie Mac, crisis-hit Iceland and struggling monoline insurers, but it said it was well placed to come through and grow.
BNP said net profit more than halved to 901 mln euros in the third quarter, below analysts' forecasts, as its bad debt charge jumped to 2 bln euros, four times as big as a year ago.
"Getting back to normal is going to take some time. But we are heading in the right direction," said BNP Paribas Chief Executive Baudouin Prot.
Elsewhere, Germany's second-largest bank Commerzbank AG said it had a relatively comfortable liquidity position, and Allied Irish said its capital position was good and would remain so.
Allied Irish, Ireland's biggest bank by market value, cut its full-year earnings per share target to around 120 euro cents to reflect higher bad debt charges, costly funding and the cost of the government bank guarantee scheme.
AIB also said it planned to increase its core tier 1 capital ratio to 7 percent "over time" from a targeted 6 percent at the end of 2008, but without diluting existing shareholdings.
RBS moved to further shore up its capital by becoming the third bank to sell bonds backed by a UK government guarantee. RBS is already raising 20 billion pounds to rebuild capital hurt by writedowns on toxic assets and its acquisition of ABN AMRO last year. It warned on Tuesday it faces more writedowns and rising bad debts this quarter, which could drag it to its first ever full-year loss.
In Austria, Raiffeisen invited investors to a meeting paving the way to asking the government for up to 2 billion euros.
Switzerland's UBS AG, the world's biggest wealth manager, said it was looking at past bonuses, an issue that has disgruntled public and regulators alike, saying its board would consider repaying bonuses already granted.