Business | Banking
BNP Paribas confident of weathering subprime storm
The exposure of France's BNP Paribas to subprime risk is limited and manageable, while the impact on quarterly earnings from the frozen funds would be "zero", its head of asset management said on Friday.
- Reuters
- Published: 00:05 August 18, 2007
Seoul/Paris: The exposure of France's BNP Paribas to subprime risk is limited and manageable, while the impact on quarterly earnings from the frozen funds would be "zero", its head of asset management said on Friday.
"The direct exposure to subprime appears limited and any losses should be manageable for the bank," said Alain Papiasse, head of asset management and services at BNP Paribas.
Papiasse was in Paris speaking to journalists on a conference call monitored in Seoul after BNP, France's biggest listed bank, this month froze 1.6 billion euros ($2.15 billion) worth of funds, citing the US subprime mortgage woes.
The executive added that the bank expected no risk to quarterly earnings from the potential exposure of these funds to subprime debt, given that any potential risks were being held by investors. "The risk to quarterly earnings is zero," Papiasse said.
Taking stock
The bank was working to ascertain the mix of investments in the funds' assets. He said it could not yet determine the value of the funds, but sought to reassure investors about the potential vulnerability of the French bank, noting funds primarily invested in investment-grade paper.
"We should be one of the most resistant institutions to subprime," he said.
BNP Paribas recently said it was barring investors from redeeming cash from Parvest Dynamic, BNP Paribas Euribor and BNP Paribas Eonia funds, which amount for less than 0.5 per cent of funds under management for the eurozone's second biggest bank by value.
Valuation of the funds would resume as soon as liquidity returned to the market, the firm said.
BNP Paribas shares rose as much as 3.1 per cent to 76.98 euros in early trade in Paris yesterday.
Stratege Finance fund manager Jacques Tissier said Papiasse's comments were reassuring but added he would continue to steer clear of financial stocks such as BNP Paribas for now.
"I am not going to add to my holdings until this crisis dies down," he said.
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