BNP Paribas Reveals Q4 $1.7 Billion Loss

France's biggest bank BNP Paribas fell to a fourth quarter net loss of 1.37 billion euros ($1.72 billion), matching an earlier forecast, as it also said it will further reduce its risk exposure in investment banking. The bank said it

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France’s biggest bank BNP Paribas fell to a fourth-quarter net loss of 1.37 billion euros ($1.72 billion), matching an earlier forecast, as it also said it will further reduce its risk exposure in investment banking.

The bank said it will still pay a dividend for 2008 after receiving two capital injections from the government, though the payout has been cut to 1 euro a share from 3.35 euros a share in 2007.

The loss, which followed a profit of 1.01 billion euros a year earlier, was due to losses in investment banking following the collapse of Lehman Brothers, the sharp drop in equity markets during the quarter and around 345 million euros of losses from the alleged Bernard Madoff fraud.

BNP said its plan for 2009 is to reduce risk-weighted assets, especially in the investment banking business where it’s slashing its activities in more complex structured products. The group also intends to further strengthen its capital position through retained earnings.

The result was in line with the 1.4 billion euro loss the bank forecast last month when it agreed to receive another 2.55 billion euros of capital from the government, which will double the amount of support it had received.

The group’s Tier 1 ratio was 7.8% at the end of December, up from 7.3% a year earlier. Factoring in the latest capital injection, the Tier 1 ratio would have been 8.4%, the bank added.

Shares in the group climbed 2.2% in early Paris trading amid gains for most European banks. The stock has lost roughly two-thirds of its value since the start of 2008.

In the short-term, BNP wants to increase its capital reserves even further by reducing assets, though it will continue to expand its retail business in France and Italy, where household indebtedness levels are the lowest in Europe. Over the long-term it plans to keep the ratio above 7.5%.

“In 2009, BNP Paribas will be developing its businesses geared towards servicing the real economy, in particular in France, and will actively keep adapting to an environment that is going to remain very challenging,” says CEO Baudouin Prot in a statement.

D.C.

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