La Defense mechanisms

2 Aug 2012 By George Hay Follow @gfhay

Euro zone turmoil gave BNP Paribas and Societe Generale a mighty scare a year ago. First-half results show how they have turned their capital and liquidity positions around. But the euro is far from fixed, and they are still lumbered with subscale investment banking arms.

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BNP Paribas reported on Aug. 2 revenue of 20 billion euros for the six months to June 30, down 11.8 percent on the same period in 2011. Net income fell 0.6 percent to 4.7 billion euros, year-on-year.
The French lender said it had completed 90 percent of its plan, announced last September, to shrink risk-weighted assets by 79 billion euros. Total losses from loan sales were 400 million euros, compared with a forecast of 800 million euros. The bank’s core Tier 1 capital ratio, on a fully-loaded Basel III basis, is now 8.9 percent.
BNP’s retail operations saw second-quarter revenue grow by 0.5 percent year-on-year, but revenue in the corporate and investment bank fell 23.6 percent compared to the second quarter of 2011. BNP’s first-half return on equity, on an annualised basis, was 9 percent.
Societe Generale reported on Aug. 1 revenue for the six months to June 30 of 12.6 billion euros, down 4.1 percent on the same period in 2011. Net income fell 30 percent to 1.2 billion euros.
SocGen said it was on track to hit its fully-loaded Basel III core Tier 1 capital ratio of 9 percent by the end of 2013. It has done 57 percent of its required deleveraging, including 33 billion euros of risk-weighted asset reduction in its investment bank. Reliance on short-term wholesale funding has fallen 30 percent since mid-2011.
BNP’s second quarter fixed income revenue fell 53 percent to 838 million euros compared to the first quarter of 2012. In the same period, SocGen’s fixed income revenue fell 50 percent to 500 million euros.
SocGen shares had risen 2.1 percent to 18.4 euros by 1030 GMT on Aug. 2. BNP shares were up 2.5 percent to 31.5 euros.

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