BNP warns of falling 2020 profits as crisis wipes out stock trading
However, Managing Director Jean-Laurent Bonnafe looked beyond the blow to trade equity derivatives, which have traditionally been a source of pride for the French financial services industry, and focused on the business model. wider of the BNP.
“The good resilience of revenues and results despite this shock demonstrates the robustness of the group’s diversified and integrated model,” Bonnafe said in a statement.
Provisions for expected losses due to the coronavirus crisis stood at 502 million euros, BNP said. Its cost of risk, which reflects provisions for bad debts, rose 85.4% to 1.42 billion euros over the period.
While BNP has warned that its 2020 net income could be around 15% to 20% lower than in 2019, the bank’s loans and repurchase agreements nearly doubled in the quarter, with its balance sheet falling to 2,700 billion euros, compared to 2,200 billion during the emergency deployment. loans to help businesses overcome bottlenecks.
“This is a key moment for them, because their objective is to increase their market share in Europe, being a leader is several activities,” said Thierry Le Clercq, manager of Mandarine Gestion.
Like its rival Société Générale SOGN.PA, BNP’s business results underperformed those of its European competitors such as Barclays BARC.L and UBS UBSG.S, both of which had a quarter bumper.
Paris-based BNP, whose net income fell to 1.28 billion euros in the quarter while turnover fell 2.3% to 10.9 billion euros. said it would accelerate cuts in its operating expenses.
BNP shares, which had fallen more than 13% since SocGen’s first quarter loss last week, rose 4.96% at 08:32 GMT.
Analysts said the net profit forecast for 2020, given by BNP, was higher than consensus estimates, which could lead to upward revisions.
BNP equity trading was “severely affected” by the market downturn at the end of March and turnover fell to minus 87 million euros, compared to 488 million euros in the same period a year ago. a year.
“The extreme and exceptional volatility thus led to a dislocation of hedges, in particular due to the restrictions of the European authorities on 2019 dividends”, declared BNP, adding that these had a one-off negative impact of 184 million euros.
Despite the blow to these “exotic” products, the better performance of interest rate trading and investment banking enabled BNP’s investment bank to remain profitable.
“BNP has one of the biggest diversifications of activities, no activity weighs too much in the results. By default, it is one of the most balanced banks in the sector with proven resilience, ”said François Chaulet, CEO of Montségur Finance.
BNP’s investment and institutional banking turnover fell by 1.9%, while pre-tax income fell by 61%. Fixed income trading income increased 34.5%.
The bank strengthened its equity derivatives activity in order to diversify its trading operations and stabilize returns by integrating the structured portfolios of Crédit Agricole, RBS and ING.
It also strengthened its prime brokerage, which deals with hedge funds, by acquiring clients and the IT platform of Deutsche Bank. He said on Tuesday that the transfer of the first customers had already been completed.
BNP, led by Bonnafe since 2011, has taken advantage of overhauls by competitors such as Deutsche and Credit Suisse to take market share in Europe and challenge Wall Street banks.
Considered a precursor for the economy in Europe, the region representing 74% of its commitments, BNP said it had raised more than 115 billion euros in financing for its clients in 2020 on the bond, syndicated loan and debt markets. ‘actions.
It said it ranked first among syndicated loans in the Europe, Middle East and Africa (EMEA) region, with a market share of 12.8% as of April 17.
But the bank reduced its commodities business and focused on Europe after paying a record fine in 2014 for violating US sanctions.
Reporting by Maya Nikolaeva; Editing by Kirsten Donovan and Alexander Smith