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BNP Paribas to repay state aid
2009-09-29
PARIS (AFP) - French banking giant BNP Paribas on Tuesday said it will raise 4.3 billion euros (6.3 billion dollars) of new capital to repay state rescue funding from October. The bank, which is repaying the support several months earlier than expected, said it no longer needed the state aid because the landscape for banking and profits had improved, and said the government will earn a significant return on its money. For the first half of the year, the bank had reported a net profit of 3.2 billion euros. BNP Paribas said it intended to free itself from October from state-provided preference shares worth 5.1 billion euros, which was allocated at the height of the banking crisis early this year. In repaying the help, the bank would also pay the French state a fee of 226 million euros calculated on seven months use of the money, the bank said. This works out at a gross return for the state of about five percent over seven months. BNP Paribas "will repay from October the 5.1 billion euros of preference shares underwritten on March 31 by the French state and will reward it with 226 million euros calculated over seven months," it said in a statement. At the time of the support, the bank had agreed with the state and with European Union competition authorities that the funds would be repaid as soon as possible. The charge for the use of the money was calculated to rise with time to encourage quick repayment, the bank explained. The aid would be repaid with money raised from the capital increase together with the creation of shareholders' funds established mainly through the payment of dividend in the form of shares. This would amount to 750 million euros. In addition, there would be an increase in the capital allocated to employees, amounting to 260 million euros, the bank said. BNP Paribas said that given the way the environment had changed and a strong performance by the group, the state aid was no longer needed. Once the arrangement has been completed, BNP Paribas will have shareholders' funds of 59.4 billion euros under the so-called Tier One calculation of the highest quality capital. The ratio of this capital to the weighted risk carried by the bank would then be more than 9.0 percent, the bank said. The French state became the biggest single shareholder in the bank after buying 5.1 billion euros worth of preference shares without voting rights. In June, the managing director of BNP Baudouin Prot had said French banks in receipt of state support would begin repaying it at the beginning of next year.
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