BNP seeks $6.3 billion in capital to repay state aid

BNP Paribas SA, France’s largest bank, plans to raise ¤4.3 billion ($6.3 billion) by selling stock to existing shareholders to help repay government funds.

BNP Paribas is offering 107.6 million shares at ¤40 each, or 29 per cent less than yesterday’s closing price, the Paris-based bank said today. The company will repay ¤5.1 billion received from the French state as well as ¤226 million of interest, it said.

France’s five top banking networks, including BNP Paribas and Societe Generale SA, received about ¤20 billion from the state to boost capital and sustain lending after Lehman Brothers Holdings Inc’s failure shook markets last September. After paying back the government, BNP Paribas’s tier-one capital ratio, an indicator of financial strength, will be more than 9 per cent, the company said. The bank rose in Paris trading.

 

“This will put them in a stronger position and I certainly support this,” said Andy Lynch, who manages $1.8 billion at Schroders Investment Managers in London and holds BNP shares. “We are likely to see more of these moves throughout Europe.”

BNP Paribas rose as much as 4.1 percent, and was up ¤1.70, or 3 per cent, at ¤58.27 by 1:29 p.m. in Paris, valuing the bank at ¤62.7 billion. The stock has risen 93 per cent in 2009, outpacing the 53 per cent gain of the 64-member Bloomberg Europe Banks and Financial Services Index.

Some banks that received help from governments have been seeking to sever ties. UBS AG freed itself from partial ownership by the Swiss government last month, when the state sold its investment for a 1.2 billion-Swiss franc ($1.16 billion) profit. In the US, Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley are among banks that repaid government funds.

UniCredit SpA and Intesa Sanpaolo SpA, Italy’s largest banks, are scheduled to decide today whether to accept state aid or raise capital by other means. Milan-based UniCredit is considering a ¤4 billion stock sale, three people familiar with the plans said on September 26.

“Capital markets are completely reopened and we can reimburse” the preferred shares owned by the state, BNP Paribas Chief Executive Officer Baudouin Prot told journalists on a conference call. “The support plan was very useful for BNP Paribas at the heart of the crisis.”

Credit Agricole SA, France’s third-largest bank by market value, sees “no urgency” in reimbursing funds it borrowed from the French government, said Anne-Sophie Gentil, a spokeswoman for the company. The Paris-based bank’s shareholders’ equity position is “satisfactory,” she said.

“As we said earlier, we could consider starting to reimburse the French State from early 2010,” said Laura Schalk, a spokeswoman for Societe Generale, France’s second-biggest bank by market value. “We will, of course, closely monitor market developments in due course.”

In return for the government funds, the French banks agreed to increase the volume of outstanding loans to households and companies by at least 3 per cent this year. BNP Paribas said it’s standing by commitments given to the state.

The capital increase isn’t intended to fund an “important acquisition,” but rather to provide the means for “sustained organic growth in its big markets,” Prot said.

Dutch newspaper Het Financieele Dagblad reported today that the government of the Netherlands is considering the sale of Fortis Commercial Banking and Fortis Commercial Finance to BNP Paribas to win approval for the planned merger of ABN Amro Holding NV and Fortis Bank Nederland NV. The state is trying to sell the businesses to satisfy European Union regulators, the paper said, citing unidentified people.

Prot declined to comment on the report. The French bank bought Fortis’s banking operations in Belgium and Luxembourg earlier this year.

BNP Paribas’s third-quarter results for its three main businesses — retail banking, investment banking and asset management services — shouldn’t differ significantly from the previous quarter, beyond seasonal effects, the bank said. Second-quarter profit rose 6.6 per cent to ¤1.6 billion, helped by the acquisition of Fortis assets and higher investment-banking revenue, the bank said August 4.

Axa SA, which holds about 5.2 per cent of BNP Paribas’s shares, will buy new stock “by exercising all of the preferential subscription rights it will be granted,” BNP said.

BNP Paribas will be offering investors one new share for every 10 they already hold. The transaction will add 8.4 per cent to earnings per share, based on analysts’ consensus estimates for 2010 net income, the bank said. The offer runs between September 30 and October 13.

The bank will also use about ¤750 million saved by paying dividends in shares and about ¤260 million from a capital increase reserved for employees to help reimburse “all of the non-voting shares issued in March to Societe de Prise de Participation de l’Etat,” the state-run financing company, BNP Paribas said.

The offer will be managed by BNP Paribas and underwritten by a syndicate led by the bank, HSBC Holdings Plc and Calyon.