BNP Paribas clients to get rich off crisis

Analysis

BNP Paribas Investment Partners, the asset management division of the French bank BNP Paribas, will unfreeze three of its funds that were taken out of service because of the mortgage crisis.

Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia will begin activity again next week. The bank said that it wanted to give investors a chance to take advantage of falling stock prices. Activity on the funds was halted on August 7. Their value was €1.6 billion ($2.18 billion) at that time, as compared to €2 billion ($2.73 billion) in the middle of July. BNP Paribas Investment Partners said that fluctuations on the market, and not defaults by individual companies, led to the reduction in the funds’ value. All three funds held securities of American companies that provided low-quality mortgage loans, but all of those companies have AAA or AA credit ratings.

BNP Paribas cited the impossibility of adequately estimating the value of several assets in its portfolio due to market instability, as well as “sudden evaporation from 6 August of any trading activity on certain sectors of the US market” as the reason for its freezing the funds. The bank’s experts estimate that the funds lost between 2% and 5% of their value while frozen. The announcement of the renewal of the funds did not hearten the bank’s investors. The bank’s stock lost 1.2%, falling to €77.84, on the Paris stock exchange. Dresdner Kleinwort analyst Milan Gudka commented that “It’s a positive step. The likelihood of BNP providing liquidity for those funds, or a sort of bail-out, is limited,” adding that its situation differs from Germany’s IKB and Sachsen LB. (kommersant.com)

 

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