BNP Paribas leads European financials lower

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The list of biggest losers on Europe’s stock market on Wednesday read like a roll-call of the continent’s top banks following a profit warning from BNP Paribas.

After the close of the previous session, the French bank announced that its investment banking division had registered a loss of €720m ($1.03bn) for the first 11 months of this year.

This news came as the group admitted to a possible $464m exposure to the alleged fraud committed by Bernard Madoff in the US.

BNP also conceded that, following an intervention by a court in Brussels, it could be forced to abandon its planned takeover of Fortis, the Belgian financial group.

Fortis was carved up by authorities in Belgium, Luxembourg and Holland in October after a €11.2bn cash injection by the governments failed to halt a slide in its share price amid fears about its financial health.

Subsequently, BNP bought the majority of the Belgian assets, but last week’s court ruling suspended the transaction, supposed to be completed this month, for 65 days.

Baudouin Prot, chief executive of BNP, was reported as saying: “If we cannot now take the capital of Fortis bank, we will pull out.”

The stream of bad news sent BNP’s shares tumbling 17.2 per cent lower to €34.22.

Credit Suisse said: “We find it difficult to justify BNP’s premium valuation given the losses announced last night in the CIB [corporate and investment banking] division, which are likely to question the group’s resilience in the crisis and put the spotlight back to solvency.”

Meanwhile, Keefe, Bruyette and Wood’s downgraded BNP’s price target from €76.20 to €60.80, saying the Madoff losses undermined the defensive image of BNP’s investment banking revenues and will “compound concerns about its core tier one position ahead of a difficult environment in 2009”.

KBW downgraded Deutsche Bank from “outperform” to “market perform” in the wake of its recent strong performance relative to the rest of the sector.

Elsewhere in the sector, Natixis dived 11.9 per cent to €1.26, Franco-Belgian bank Dexia lost 7.6 per cent to €2.89 and Deutsche Bank shed 8.8 per cent to €25.53, while Société Générale fell 5.8 per cent to €34.81.

At the other end of the market, Fortis stock responded well to the Belgian court ruling. The share price rallied 3.8 per cent to €0.96.

In the wider market, the FTSE Eurofirst 300 index sank 0.8 per cent to 828.53. In Frankfurt, the Xetra Dax was 0.5 per cent lower at 4,708.38 and, in Paris, the CAC 40 fell 0.3 per cent to 3,342.91.

Finnish papermakers lost ground after M-Real warned of weaker fourth-quarter and year-end results as the recession knocked global demand.

Its shares fell 7.8 per cent to €0.83. Stora Enso fell 6.3 per cent to €5.33 and UPM Kymmene, which warned on profit last week, dropped 4.1 per cent to €8.57.

Commodities stocks held firm, in spite of the turmoil in the financial sector and a $3 drop in the price of oil as a US inventory report showed crude oil and refined products supplies rose last week, overshadowing Opec’s output cut.

In Portugal, Galp Energia rose 1.1 per cent to €7.72, France’s Total added 1.2 per cent to €41.50, Norway’s StatoilHydro rose 3.2 per cent to NKr114.50 and, in Austria, OMV advanced 2 per cent to €20.39.

Among metals stocks, French miner Eramet added 1.6 per cent to €135.11, aluminium company Norsk Hydro added 5.1 per cent to NKr27 and steelmaker ArcelorMittal gained 4 per cent to €18 while Swedish peer SSAB rose 1.2 per cent to SKr66.25.

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