Fitch: Fortis Unit Deal Benefits BNP Paribas and Belgian State


PARIS/LONDON, November 19 (Fitch) Last week's agreement for BNPParibas (BNPP) to buy Belgium's 25% stake in its BNP Paribas Fortis subsidiaryhas benefits for both the French bank and the Belgian state, Fitch Ratings says.It simplifies BNPP's group structure while continuing to enhance earnings, andreduces public debt for Belgium.BNPP's earnings already benefit from its majority ownership ofBNP Paribas Fortis. The bank says the deal is likely to be accretive toearnings per share in 2013. It estimated synergies from the 75% majority stake atEUR1.5bn in 2012, largely owing to rationalisation of IT systems, and there wereadditional revenues as BNPP's products were rolled out to BNP ParibasFortis clients. These have continued into 2013. BNPP has also benefitted from thepositive amortisation of fair-value adjustments related to the BNPParibas Fortis acquisition (total adjustments of EUR6.8bn at purchase), butthis is no longer material in 2013.The deal would be neutral to BNPP's 'A+' rating. There wouldalso be no change to the ratings of BNP Paribas Fortis, which are alreadyequalised with those of BNPP, as we view it as a core subsidiary and expect support tobe forthcoming from the parent rather than the Belgian authorities. Belgium andLuxembourg are part of the group's core retail franchise and the originalacquisition of BNP Paribas Fortis in 2009 has strengthened the customer base andbeen financially beneficial.BNPP's solid capitalisation gives it the flexibility to expandits franchise and seize growth opportunities. Its fully loaded Basel III commonequity ratio of 10.8% at end-3Q13 exceeded management's target and compares wellwith its domestic and international peers. The purchase will lower thisratio by around 50bp, which is manageable. The deal will facilitate any furthertransfer of assets and businesses between BNPP and its subsidiary. The disengagement of the Belgian authorities is a sign thatbanking sector risks are receding in the country, although they are still high. TheEUR3.25bn transaction should generate a capital gain of around EUR900m forthe Belgian state and reduce 2013 debt by around 0.9% of GDP. However,weaker inflationary pressures in 2013-2014 and slower fiscal consolidation thanpreviously envisaged has led us to extend our public debt peak estimate of 100% ofGDP to 2014, from 2013. We believe public debt dynamics remain within thetolerance of the 'AA' sovereign rating, which we affirmed today.The Belgian state remains a major shareholder of BNP Paribas(10.3% of the group).Contact: Alain Branchey Senior DirectorFinancial Institutions +33 1 44 29 91 41Fitch France S.A.S.60 rue du Monceau75008 ParisMichele NapolitanoDirectorSovereigns+44 20 3530 1536Cynthia Chan Senior DirectorFitch Wire+44 20 3530 1655Media Relations: Peter Fitzpatrick, London, Tel: +44 20 35301103, Email:; Hannah Huntly, London, Tel:+44 20 3530 1153, Email: above article originally appeared as a post on the FitchWire credit market commentary page. The original article can be accessed All opinions expressed are those of Fitch Ratings.ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS ANDDISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THISLINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION,RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLEON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'SCODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATEFIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLEFROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHERPERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN ANEU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUERON THE FITCH WEBSITE.

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