BNP Paribas profits boosted after windfall from Bank of the West

BNP Paribas posted a rise in underlying revenues and profits in the first quarter, lifted like some US rivals by higher income from rates and bond trading and as the French bank whittled down provisions set aside to shield it from souring loans.

Earnings at the eurozone’s biggest bank were muddied, however, by one-off items. These included a capital gain of nearly €3bn from selling its US-based Bank of the West unit, in a deal that closed earlier this year, balanced by hits from charges, such as a contribution to the EU’s banking crisis backstop scheme.

Including these one-off factors, BNP’s net profit more than doubled from a year earlier to €4.4bn. When stripping out the distortions, the bank said profits came in at €2.8bn, up 50 per cent from €1.8bn in the first quarter of 2022, a figure restated to exclude operations at San Francisco-based Bank of the West.

BNP’s overall revenues came in at €12.04bn, slightly undershooting analyst expectations for €12.08bn in a Bloomberg poll. These were lower than the €13.2bn in revenues published a year earlier but, when compared to restated figures, would have increased by 5.3 per cent, BNP said.

Revenues were also affected by €400mn in hedging adjustments, BNP added. This was because the European Central Bank changed the terms of the cheap loan scheme it had provided to banks during the Covid-19 outbreak now that rate rises are boosting lenders.

But BNP’s cost of risk, a measure of the provisions it sets aside to cover potential bad loans, was lower than a year ago, in one sign of underlying momentum and an improving outlook.

The volume of loans outstanding in many of BNP’s main markets also rose. Its commercial and personal banking revenues increased in France, where it is more geared towards lending to businesses than some local rivals which are more exposed to consumer protections shielding borrowers from rapid mortgage rate rises.

BNP’s earnings from fixed income, currencies and commodities trading, meanwhile, increased by 9 per cent from a year earlier to €1.9bn, following a more patchy performance at some big Wall Street rivals. That helped boost revenues overall at the French lender’s corporate and investment bank, even though dealmaking slowed globally and BNP’s income from equity trading dropped.

BNP, which has launched a €5bn share buyback programme this year, upheld its financial targets to 2025, including a projected increase of more than 9 per cent in its net income for 2023.

The bank had revised those targets upwards earlier this year as the economic outlook across Europe, constrained last year by an energy crisis, began to improve. That was also before banking failures in the US, such as tech lender SVB, which spooked bank investors, soon followed in Switzerland by UBS’s takeover of Credit Suisse.

BNP’s share price slumped in March because of those shockwaves, although it has since recovered. It had risen around 16 per cent to nearly €58.90 per share on Tuesday since a low point of €50.50 on March 24.

BNP said that its contributions to the EU’s Single Resolution Fund — a banking safety net created after the 2008 financial crisis — had reached just over €950mn in the quarter.