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Q3 net profit misses expectations as provisions rise

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Investment bank sales grow but lag Wall Street rivals

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AXA IM deal synergies targets raised

(Recasts, adds shares reaction in paragraph 6)

By Mathieu Rosemain

PARIS, Oct 28 (Reuters) - BNP Paribas missed

third-quarter profit forecasts on Tuesday as a cautious mood

among major corporate clients and higher provisions for bad

loans, including an undisclosed issue at its markets arm,

weighed on results.

BNP's investment bank revenues rose, but trailed Wall Street

rivals after a strong run in markets.

Its global banking unit, which advises and lends to large

companies, saw sales fall 2.6%, slightly below forecast, as

geopolitical tensions and a "wait-and-see" mood among clients

slowed activity amid a weaker dollar, the bank said.

Rising debt provisions added to the challenges for the euro

zone's biggest lender by assets, at a time when its shares have

been hit by Sudan-related litigation.

However, the French bank raised its cost-saving targets for

the integration of AXA's asset management arm.

BNP's shares were down by about 3% in early trading.

"The benefits from the AXA deal are guided to be higher but

are relatively small in the group context in the near term,"

Royal Bank of Canada said in a note, adding that "more

visibility on the Sudan case is likely to be needed for the

shares to re-rate."

"The recent jury verdict awarding damages to three

individual plaintiffs is fundamentally flawed as a matter of

fact and law and should be overturned," BNP, which is appealing

the court decision, said on Tuesday.

COST OF INTEGRATING AXA IM

BNP posted a net profit of 3.04 billion euros ($3.55

billion) for July-September, up 6.1% from a year earlier but

below the company-compiled 3.09 billion-euro average of 16

analyst estimates.

Revenues climbed 5.3% to 12.6 billion euros, missing the

12.8 billion-euro average estimate.

The bank said integrating AXA's fund arm, bought this year

for 5.1 billion euros, would cost about 690 million euros, with

the third quarter marking its first inclusion in BNP's results.

BNP raised its synergy targets from the deal, now expecting

a return on invested capital of 18% in 2028, up from 14%

previously, and 22% in 2029, up from 20%.

The acquisition aims to strengthen BNP's fee-based asset

management business and cut reliance on capital-heavy lending,

as the bank seeks to close the gap with U.S. giants and Europe's

Amundi.

INVESTMENT BANK GROWS

Provisions to cover bad loans rose 24% year-on-year to 905

million euros in the quarter, matching expectations, but driven

by a "specific credit situation" in its global markets unit. It

did not give details.

In BNP's investment bank, a business CEO Jean-Laurent

Bonnafe has sought to make the engine of growth in recent years,

revenue rose 4.5% to 4.46 billion euros, while fixed income,

currencies and commodities trading was up 3.7%.

By comparison, Goldman Sachs ( GS ) reported a 17% increase in

fixed income, currencies and commodities, while JPMorgan's

markets revenue, spanning equities and fixed income, jumped 25%.

But at BNP's commercial and personal banking division, the

net interest margin - the difference between what it earns on

loans and what it pays on deposits - rose 4.5% in the euro zone.

The bank kept its 2025 net income target of more than 12.2

billion euros and its guidance for a return on tangible equity

of 13% by 2028.

($1 = 0.8575 euros)