BNP cuts Italy exposure as Greece hits Q3

Thu Nov 3, 2011 7:07am EDT
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By Lionel Laurent and Matthieu Protard

PARIS (Reuters) - France's biggest listed bank BNP Paribas slashed its exposure to Greece, Italy and Spain by more than 12 billion euros ($16.6 billion) in a bid to protect its balance sheet as the euro zone debt crisis threatens to deepen.

Losses on these bond sales, as well as a heftier-than-expected 2.26 billion-euro charge on BNP's Greek sovereign debt, contributed to a 72 percent slide in quarterly earnings at the bank, seen as one of the most exposed to Europe's woes.

Although the earnings hit was bigger than expected, shares of BNP rose more than 6 percent after investors praised the bank's pragmatism in valuing its Greek debt more aggressively and in selling down its overall euro sovereign exposure.

"BNP has taken a cautious attitude on Greek debt," said Marine Michel, a Paris-based fund manager at Montsegur Finance, which manages 200 million euros in assets. "Given the current developments it's a bold move."

BNP wrote down 60 percent of its sovereign exposure to the crisis-hit Greek economy, reflecting last month's pledge from private-sector creditors to write off a bigger chunk of their Greek debt, the bank said in a statement, though it added the plan was still "shrouded by uncertainty."

But even more striking was its reduction in exposure to Italy -- which the bank has always insisted had a handle on its debt crisis -- by 8.3 billion euros, or 40 percent, and to Spain by 2.2 billion euros, or 81.5 percent.

"It was a surprise ... But it means much less peripheral sovereign debt and that's going to be taken well by the market," a London-based bank analyst said.

BNP Paribas shares were up 5.4 percent, at 1030 GMT, higher than domestic rivals Credit Agricole and Societe Generale, up 3.3 and 2.1 percent respectively.   Continued...