PARIS, Oct 27: The net earnings of the world’s biggest banks rose by a third last year, due to large amounts of loans and a drop in the cost of risk, according to a Bank of France study published on Thursday.

“The strong growth context of the world economy, particularly a drop in business failures, was favourable to the activity of the large international banks in 2004,” the bank said in an October statement.

Despite an overall 33 per cent profit hike in 2004, the study warned banks to be aware of growing risk in the current, less favourable, economic climate.

Switzerland posted a particularly high profit rise of 79.1 per cent, or 10.2 billion euros ($12.4 billion) in 2004.

Net profit rose in Italy by 45.3 per cent (6.6 billion euros), in France by 32 per cent (14.1 billion euros) and in Belgium, The Netherlands and Luxembourg (Benelux) by 30.1 per cent (17.3 billion euros).

Bouncing back from net losses in 2003, Germany had a net profit of 1.5bn euros and Japan had a net profit of 4.5 billion euros.

After dropping 1.6 per cent in 2003, the net earnings from banking activities of all the banks reached 669 billion euros in 2004, up 5.5 per cent.

The report said that last year there had been a drop in bad debt and a reduction in the global risk of loans, down by 35 per cent after a drop of 17pc in 2003.

European banks should maintain adequate funds and risk cover to take into account a possible rise in risk in coming months, partly due to high oil prices, the study warned.

Banks should show an “increased commercial aggressivity” towards businesses and individuals due to competitive pressure and low interest rates, it added.

The Bank of France carried out its 2004 study on the five main banking groups in Benelux, Britain, France, Germany, Italy, Japan, Spain, Switzerland and the United States.—AFP