BNP Paribas, France's biggest listed bank, reported a 21 percent rise in third-quarter net profit, in sharp contrast to the slump in earnings of many major banks following the global credit crisis.
It said the market environment remained uncertain but added it remained well-placed to withstand the worst effects of sector losses in the credit market.
In a business environment that remains uncertain, BNP Paribas will pursue its strategy based on a well-balanced portfolio of well-positioned businesses, said Chief Executive Baudouin Prot in a statement.
Net profit rose to 2.027 billion euros ($2.97 billion), boosted by higher earnings at the overseas banking and asset management divisions which offset lower profits at its corporate and investment banking unit.
Nineteen analysts polled by Reuters had an average net profit forecast of 1.892 billion euros.
Many of the world's top banks have been hit by writedowns related to the U.S. subprime mortgage sector, with UBS and Merrill Lynch posting third-quarter losses. Subprime lenders give loans to consumers with a poor credit history.
On Wednesday, rival French bank Societe Generale reported an 11.5 percent fall in its third-quarter net profit. Credit Agricole, France's biggest retail bank, posts third quarter numbers next week.
BNP Paribas shares were up 1.3 percent at 71.60 euros in mid-afternoon trade. It outperformed a 1.2 percent fall in the DJ Stoxx European bank sector and a 0.9 percent decline in France's benchmarkk CAC-40 index.
In the European banks sector we favour defensive stocks and we favour BNP Paribas within the whole spectrum of defensive banks, Credit Suisse said in a research note.
Credit Suisse has BNP Paribas on its focus list of recommended stocks and kept an outperform rating on it.
CAPITAL GAINS BOOST PROFITS
BNP Paribas' third quarter profits were also boosted by the sale in September of the bank's 6.5 percent stake in France's Bouygues Telecom which led to a capital gain of 268 million euros.
The French bank also booked a third-quarter capital gain of 52 million euros due to the flotation of Bank of Nanjing, a Chinese bank in which BNP Paribas has a stake.
On August 9, BNP Paribas announced the freezing of three funds due to problems in the subprime sector. The announcement was partly responsible for a global stock market fall on that day.
The three funds have since been reopened and they showed a fall of roughly between 1-2 percent in their net asset values.
BNP Paribas said the credit crisis had a total impact of 301 million euros on the group during the third quarter and the bank was cautious about the current business environment.
The financial market crisis is continuing, CEO Prot told reporters.
Agilis Gestion fund manager Frederic Hamm said he would continue to steer clear of BNP Paribas shares given the uncertainty surrounding the global banking industry.
You have to be very careful with this sector, he said.
Based on latest prices, BNP Paribas shares have fallen around 13 percent since the start of 2007, compared with a 16 percent fall in the DJ Stoxx European banking sector. (Reporting by Sudip Kar-Gupta; editing by David Cowell)