BNP Paribas, France's biggest listed bank, beat forecasts for first-quarter revenue and earnings, driven by strong retail growth and resilient investment banking.

BNP's European retail footprint helped offset weaker capital market revenue amid market jitters over euro zone debt levels, Arab world unrest and the Japanese earthquake.

I am still in a cautiously optimistic mood ... I expect this level of sustained activity to continue over the next quarters, chief executive Baudouin Prot told Reuters Insider television on Wednesday.

Quarterly net income rose 14.6 percent to 2.62 billion euros ($3.9 billion), compared with a forecast for 2.25 billion in a Reuters poll. Revenue grew 1.3 percent to 11.7 billion euros, also higher than expected.

Retail banking was buoyed by loan growth across western Europe and appetite for mortgages in France.

Provisions against loan losses tumbled almost a third across the group, helping BNP's investment bank profit better resist a 14.5 percent drop in capital markets revenue.

Provisions for 2011 were seen significantly lower than last year, Prot told Insider.

European peers including Barclays, Credit Suisse and UBS, saw investment banking profit fall 15-30 percent in the first quarter. BNP's unit reported a 5 percent fall in pre-tax earnings.

GREECE IMPACT LIMITED

Prot said there was still no need for a capital increase to meet tougher incoming rules under Basel III, adding the bank's own financial firepower would be enough.

First-quarter return on equity was 15.1 percent on an annualized basis, which would put BNP on track to hit its target for an annual ROE of 15 percent.

Even a possible debt restructuring by crisis-wracked Greece would only have a limited impact on BNP, Prot said.

We would be impacted ... in a limited, not marginal, but limited way, Prot said, adding BNP's total sovereign exposure to Greece, Ireland and Portugal stood at 6.7 billion euros at end-March.

Unlike smaller French rivals Credit Agricole and Societe Generale, BNP does not own a bank in Greece that would be exposed to broader economic troubles.

However, BNP did see pretax profit virtually wiped out at its emerging-market retail division, hurt by charges on North African unrest and shrinking revenue in Ukraine.

Prot, one of the few bank chiefs to have kept his job through the financial crisis, also said he was confident BNP would pass the fresh batch of European Union bank stress tests this year.

BNP was not considering growing via acquisitions, he said.

BNP shares have risen 12 percent this year, underperforming domestic rivals but outperforming the broader STOXX Europe 600 index as less risk-averse investors return to banks that bore the brunt of euro zone fears.

The bank has a market value of 64 billion euros, behind British lender HSBC and Spanish group Banco Santander.

(Editing by James Regan and Dan Lalor)

($1 = 0.6726 euro)

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