French bank BNP Paribas said Thursday that its net profit plummeted 72 percent in the third quarter after it accounted for expected losses on its Greek bonds in line with a new European agreement that hopes to reduce Greece's burden and stop the crisis' march.
Under the new deal, inked just over a week ago, private holders of Greek debt agreed to take 50 percent losses on those bonds, in the hopes of helping Greece eventually dig out of its debt hole and protecting other countries from getting sucked into a similar situation.
The agreement has not yet been implemented and the Greek prime minister's surprise announcement this week to send it to a referendum has thrown the accord into question. Despite that uncertainty, BNP said it set aside a provision for 60 percent losses on all the Greek bonds it holds.
After that provision, BNP's net profit was 541 million euros ($747 million), down from 1.9 billion euros in the same period last year.
The bank did not say why it factored in larger losses than agreed to, but it was presumably to calm market fears that it could weather the losses.
European banks, which hold a significant amount of debt from Greece and other wobbly countries, have seen runs on their stocks in recent months and have struggled to secure the overnight loans they use to fund their day-to-day operations. Several have had their ratings downgraded; BNP Paribas' is under review.
In its statement, BNP underscored that it was reducing its dependence on sometimes-hard-to-secure dollar loans and that it had a comfortable capital cushion. Banks have been asked to shore up their balance sheets to weather the losses on Greek and other sovereign debt.
"The new Greek debt restructuring plan has adversely impacted this quarter's net income, which, otherwise, is in line with the performances of previous quarters," said CEO Baudouin Prot said. "During this very challenging quarter, BNP Paribas continued to generate profits and to maintain its solvency ratio at a high level."
While the biggest hit came from the Greek haircut, the company's performance has also been hurt by the worsening economy, and its revenues slumped 7.6 percent to 10 billion euros in the July-September period.
But without the provision, net profit would have risen 2.4 percent to nearly 2 billion euros.
© Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.