BNP Paribas bets on investment bank for growth despite bond trading blip
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BNP Paribas is betting momentum in its investment bank will help drive earnings growth this year even as its bond traders underperformed Wall Street peers in the first quarter.
The eurozone’s biggest bank on Thursday said it expected profits to rise this year, and forecast revenue growth of 2 per cent, even as central banks are expected to start cutting interest rates and some of BNP’s businesses had a mixed start to the year.
The Paris-based lender reported net profits of €3.1bn for the quarter, down 30 per cent from a year earlier but better than analysts were expecting.
In its corporate and investment bank, which BNP has been building up, the deal advisory and financing teams drove a 6.1 per cent rise in “global banking” revenue, echoing a rebound on Wall Street.
Sales from equities trading increased 11 per cent thanks in part to the prime brokerage business that serves hedge funds and which BNP expanded by buying a unit from rival Deutsche Bank.
But revenues from fixed income, currencies and commodities trading lagged behind the increases recorded by the likes of Goldman Sachs, and missed forecasts.
FICC revenues fell 20 per cent because of low volatility in European markets compared with a year earlier and in 2022, BNP said, when Russia’s full-scale invasion of Ukraine caused sharp moves in commodity prices.
BNP said it was nonetheless banking on market share gains in its investment bank this year, and was bullish on the economic outlook despite expectations that interest rates will start to fall after a cycle of rapid rises that boosted lenders’ profits in the US and Europe.
In February, BNP shares dropped almost 10 per cent when it announced it was pushing back a key profitability target by a year. They have climbed since and are close to seven-year highs, echoing a European banking stock rally.
“BNP Paribas is well positioned for the new phase of the economic cycle,” BNP chief executive Jean-Laurent Bonnafé said on Thursday.
While many lenders across Europe have profited thanks to higher margins, French banks that rely mostly on fixed-rate mortgages have felt the boost more slowly.
Those gains are now feeding through to French lenders as they make new loans, though BNP’s personal and commercial banking revenues in France were held back by inflation hedges that are expected to disappear later this year.
The bank sounded one note of caution on its car financing business Arval — an area where French rivals Société Générale and Crédit Agricole are also big operators — saying used car values were now falling from recent highs.
Declining used car values will have an impact on the business, including as clients buy the cars as the end of their leases. Arval’s revenues fell 5.8 per cent in the first quarter.
