BNP Paribas shares fall after trading revenues disappoint

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BNP Paribas reported a drop in trading revenues in the third quarter, overshadowing better performance elsewhere in its corporate and investment bank, where loan demand from large clients grew.

After benefiting last year from turmoil in energy markets unleashed by the invasion of Ukraine, BNP’s revenues in fixed income, currencies and commodities (FICC), a key area for many investment banks, fell 14.3 per cent in the quarter from the same period a year earlier.

This echoed patchy performances in FICC at other European banks, such as Deutsche Bank and Barclays, even as Wall Street rivals either reported less severe drops or a jump in revenues.

Shares in BNP were down almost 4 per cent in early trading on Thursday.

The trading division was a blot on a quarter in which revenues at the eurozone’s largest bank climbed 4 per cent to €11.58bn, just ahead of analyst forecasts of €11.52bn.

The group’s net profit of €2.66bn was also roughly in line with predictions. It fell from a year ago on a reported basis but was up 0.9 per cent after stripping out discontinued businesses. Provisions set aside for bad loans were also lower.

Anke Reingen, analyst at RBC Capital Markets, said the results were “solid with mixed trends.”

Revenues in the unit that arranges bonds and loans and advises on deals rose nearly 20 per cent. That helped carry its corporate and investment banking division overall, which saw revenues climb 3 per cent.

Since the Covid-19 pandemic, BNP has made a push to gain market share with loans to large corporate clients across Europe and enjoyed a particularly strong quarter on this front.

Like many of its European rivals, BNP has begun to benefit from rising interest rates, though it has a smaller presence than some of its peers in retail banking areas such as mortgages.

BNP delivered a better performance in its Belgian and Italian banks than in its French personal and commercial banking division, where it is making cutbacks. In France, lenders have been more constrained than peers elsewhere in their ability to pass on interest rate increases, as a so-called usury rate set by the Bank of France has served as a cap on rapid rises.

This phenomenon is expected to ease by next year as the usury rate goes up but will still spell short-term pain for other French banks such as Crédit Agricole and Société Générale.

Revenues at BNP’s Arval car leasing unit rose by nearly 12 per cent, but analysts at Jefferies said this was slightly lower than expected.

BNP said its common equity tier one capital ratio — a common measure of financial strength — stood at 13.4 per cent at the end of September, down slightly from 13.6 per cent at the end of June but ahead of some analysts’ expectations.

With a $16.3bn windfall from selling its US-based Bank of the West unit, BNP is expected to use the proceeds on smaller acquisitions.

It is looking at areas such as insurance or asset management, while also investing in IT systems internally as it seeks to lift profitability. It has also been buying back shares.