BNP Paribas reported better than expected revenues and profits for the first quarter, boosted by a surge in trading as the push by France’s biggest lender to build out its investment bank showed signs of paying off.
Equities and fixed income trading revenues rose sharply in the first three months of the year, as the bank joined rivals including Deutsche Bank and Barclays in capitalising on the turmoil unleashed in markets following Russia’s invasion of Ukraine. Earnings from equity trading stood out, jumping almost 61 per cent.
That helped the bank lift its total revenue to €13.2bn in the quarter, up 11.7 per cent from a year ago. Net income climbed to €2.1bn, up 19.2 per cent and surpassing analysts’ forecasts.
BNP, the eurozone’s biggest listed bank, was less exposed to Russia than many European rivals, mainly operating a business supporting large companies transacting there. It has stopped processing deals of all kinds since the invasion, though retains its Russian licence and a couple of hundred employees.
Its overall exposure to Russia, originally listed as €1.3bn, had been whittled down to about €100mn, a person familiar with the matter said, adding that the unit would probably remain “dormant”. BNP’s French rival Société Générale, which had a retail bank in Russia, has opted to sell out.
BNP also booked a €159mn impairment on its majority stake in its Ukrainian retail bank Ukrsibbank, which has 5,000 employees and is maintaining some operations.
BNP benefited from a lower cost of risk, with charges on bad loans down sharply after a period dominated by the pandemic. The group released some provisions linked to Bank of the West, the US lender it is selling.
Alongside the results, BNP also maintained its financial targets through to 2025, even as economic growth in its home market stalls and the fallout of the Ukraine conflict takes its toll across the eurozone.
Its goals include annual revenue growth of more than 3.5 per cent and a pledge to return 60 per cent of profits to shareholders.
Shares in the bank were up more than 3 per cent in morning trading.
Analysts said the results were solid, although Anke Reingen of RBC Capital Markets suggested that some of the drivers of the first-quarter performance might not be repeated.
“The sustainability of some of the drivers of the large Q1 beat is questionable,” the brokerage said in a note, pointing to the lower-than-expected provisions and the boost from the markets business.
Like US competitors, BNP Paribas noted that dealmaking had cooled in the first three months of the year, and companies issued less debt and equity to finance acquisitions.
But BNP Paribas has been pushing to gain market share in areas it was previously weaker in, including cash equities, and trying to benefit as other investment banks restructure or retreat to build up a position as a go-to player in Europe.
The group has integrated a prime services business it acquired from Deutsche Bank — a unit that serves hedge funds — and has brought its Exane equities brokerage fully in-house. It is also bringing over some hedge fund clients from Credit Suisse as part of a prime services referral agreement signed with the Swiss bank.
BNP Paribas had expanded lending across the eurozone at the height of the pandemic and has since sought to build on that.
Analysts at Barclays said BNP’s results augured well for underlying trends at SocGen, which also reports results this week, although the bank will take a €3.1bn hit linked to its Russia exit.
“The equities and French retail performances are a good read-across for SocGen,” the analysts said.
