14.0% ANNUALISED RETURN ON EQUITY AFTER TAX FOR THE FIRST NINE MONTHS OF 2002
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- In an environment marked by a serious financial crisis, the Group posted for the third quarter Euros 4,040mn in Net Banking Income, down 3.8% compared to the third quarter 2001 (-4.6% at constant scope and exchange rates).
- Operating expenses and depreciation rose only 1.7% to Euros 2,728mn (+0.2% at constant scope and exchange rates) and gross operating income fell 13.5% to Euros 1,312mn.
- Provisions rose Euros 17mn (+4.6%).
- Operating income totalled Euros 925mn (-19.4%).
- The exceptional high level of provisions for the equity investment portfolio (Euros 244mn) led to a 22.9% decline in the net income, group share (Euros 573mn).
- Despite the stock market meltdown, Corporate and Investment Banking and Asset Management and Services posted third quarter cost/income ratios of 65.3% and 69.1% respectively and pre-tax quarterly income in excess of Euros 200mn each.
- Retail Banking's businesses continued to enjoy a fast growth, especially outside France; their pre-tax income was up 9.4% at Euros 616mn.
The Board of Directors of BNP Paribas examined the Group's results for the third quarter as well as the first nine months of the year.
The quarter was marked by the continuing and deepening global stock market crisis, which, by the end of September, had become extremely acute. In terms of the actual economy, recovery in the US has been deferred and there are signs confirming a slowdown in Europe.
In this context, BNP Paribas Group's net banking income fell 3.8% in the third quarter 2002 compared to the third quarter 2001, at Euros 4,040mn (-4.6% at constant scope and exchange rates). This fall stems from the market crisis, which has adverse repercussions on trading revenues (-27.9% at Euros 611mn) and on fees based on portfolio valuation (service and securities custody fees) or stock market orders (brokerage services).
The increase in operating expenses and depreciation was contained to 1.7%, at Euros 2,728mn, which translates at constant scope and exchange rates into virtual stability (+0.2%).
Gross operating income came to Euros 1,312mn, down 13.5% compared to the third quarter of 2001 (-13.0% at constant scope and exchange rates).
Provisions were increased by only 4.6% to Euros 387mn (+2.2% at constant scope and exchange rates) compared to the third quarter 2001. The Group continued its rigorous management and a broad diversification of its credit risks.
The net addition to reserves due to value impairment provision was Euros 244mn. Taking into account the extremely volatile equity markets, the Group, in addition to its usual provisioning, set aside additional provisions for various listed equity investments and, moreover, globally reallocated the Reserve for Potential Sectorial Risks (Euros 218mn) to covering the portfolio. Given these reserves, at 30th September stock market prices, the Group's portfolio had Euros 1.9bn in unrealised capital gains, including Euros 1.5bn for BNP Paribas Capital (Cobepa's goodwill deducted) and Euros 0.4bn excluding BNP Paribas Capital.
In total, non-operating items dropped from +Euros 80mn (in the third quarter 2001) to Euros 112mn and net income, group share, totalled Euros 573mn (-22.9% compared to the third quarter 2001).
For the first nine months of the year, the cost/income ratio came to 65.1% and testifies to the fact that BNP Paribas has held up well in a difficult environment. The Group's pre-tax return on equity reached 14.0%.
The total capital ratio, at 11.4%, and the tier one ratio, at 8.0%, show that the Group's balance sheet is strong. BNP Paribas has seized the share price opportunities presented by the crisis in the markets since July to buy back shares in accordance with the strategy it announced. As at 31st October, 8.7 million shares had been bought back.