France's biggest listed bank, BNP Paribas, is expected to report a 63 per cent slump in quarterly profit on Wednesday, hit by Greek sovereign debt writedowns, euro-related market stress and a bid to slim down its balance sheet.
But the bank should pay a dividend for 2011, according to analysts, which will give added comfort to investors as euro zone bank stocks rally on the back of massive cheap funding from the European Central Bank.
BNP, which reports results, is seen posting quarterly net income of euro 574 million ($758.63 million), down from 1.55 billion for the same period a year earlier, according to a Reuters poll of 10 analysts.
Revenue is expected to fall 11 per cent to euro 9.16 billion and the dividend will be cut by around 42 per cent to euro 1.21 per share, according to the same poll.
Chief Executive Jean-Laurent Bonnafe, a longtime company insider who took the reins in December, will be closely watched for any hints on strategic shifts or asset sales. Speculation has swirled over BNP's real-estate subsidiary Klepierre and its US unit BancWest as possible disposals.
Fourth-quarter profit will be affected by additional Greek sovereign debt writedowns, which should lead to a total cumulative haircut of 70 to 80 per cent. Analysts are forecasting some euro 578 million in pre-tax charges as banks try to draw a line under their exposure to the debt-wracked Greek economy.
BNP's corporate and investment bank, which is bearing the brunt of a restructuring plan to slash costs and cut jobs to bolster capital and navigate the euro zone crisis, is expected to post a pre-tax loss of euro 123 million.
Euro-related stress on credit markets and trading has taken a big bite out of European banks’ profits: Germany's Deutsche Bank and Switzerland's Credit Suisse ended 2011 with quarterly losses while Barclays posted its worst quarter for three years.
French banks like BNP and, to a lesser extent, rival Societe Generale have the added benefit of sizeable "cash-cow" retail banks that balance out volatile capital-markets trading.
Despite its sluggish overall economic growth, France is a profitable hunting ground for retail banks because of high household savings rates and low debt levels.
Those times may not last, however: Socialist presidential candidate and poll favourite Francois Hollande has pledged to split banking activities to protect taxpayers if he wins the election in May, a measure that may slam the brakes on a continued recovery in French bank shares.
