BNP Paribas said on Tuesday that its investment-banking unit suffered a ?710 million (S$1.5 billion) loss, and said it may cut 700 jobs.

BNP Paribas said the unit had been hit by rocky financial markets and its exposure to an alleged $50 billion fraud by U.S. financier Bernard Madoff.

BNP on Sunday said its loss from the alleged fraud, which has hit many of the world's top banks, could be 350 million euros.

"Due to recent extremely unfavourable market conditions, the bank's CIB (corporate and investment banking) division is loss making over the first 11 months of 2008," BNP said in a statement.

It said it could cut 5 percent of jobs at the unit as part of a restructuring that would also see BNP reduce its market risk and bonds inventories.

The investment banking arm employs 14,000 worldwide, while BNP Paribas overall has 171,000 staff. The possible cull of 700 jobs would be one of the biggest recently seen at the unit.

BNP said the group overall was "largely profitable" for the first 11 months, but analysts said the investment banking loss could dent its image as one of the world's safer banks.

Last year, BNP spooked markets by freezing three investment funds due to the credit crisis, but the French bank had ridden out the tough market environment better than its rivals.

"There's going to be disappointment. They were seen as one of the defensives in the sector," said a London-based analyst who declined to be named.