Trading and investment banking buoyed third-quarter results at BNP Paribas, helping offset weakness in commercial and retail operations at the Eurozone’s biggest bank.
The Paris-listed lender reported quarterly net income of €2.87bn, 5.9 per cent higher than a year ago, and a 2.7 per cent increase in revenues to €11.9bn. Both figures were in line with analysts’ expectations.
Gains were driven by BNP’s global markets business, with a particularly sharp uptick in demand for prime brokerage services as hedge funds sought to capitalise on volatile equity markets and uncertainty around major global events such as the US election.
Although investment banks across Europe and the US have reported strong performance in equities trading this quarter, BNP posted gains across both its equities and fixed-income trading businesses.
Revenues in BNP’s equity and prime services division were 13 per cent higher than a year ago at €820mn, while its fixed-income traders increased revenues by 12 per cent to €1.2bn.
The bank’s historic strength has been fixed income. But it is now benefiting from several years of investment in its equities business and from building up its prime brokerage offering, where it has taken over teams and clients from Deutsche Bank.
The bank also benefited from the tentative recovery in investment banking. Revenues in its global banking operations rose 5.9 per cent, driven by capital markets activity across Europe, Middle East and Africa and transaction banking in the Americas and the Asia-Pacific region.
This balanced out some weakness in commercial and retail banking which fell 2.6 per cent in the quarter — below consensus estimates from Oddo BHF — due to falling revenues from disposals of used cars at its long-term rental service Arval.
Shares in the French bank, which is seen as a proxy for the economy, sank after President Emmanuel Macron unexpectedly dissolved parliament and called elections in June.
However, they have recovered after the July vote delivered a hung parliament and are up more than 3 per cent this year for a market value of €74bn. They trail the Stoxx 600 banking index which has gained more than 20 per cent in the same period.
“The third quarter illustrates corporate and investment banking’s capacity to gain market share and . . . strong business momentum especially in insurance and asset management,” said chief executive Jean-Laurent Bonnafé. He added that the commercial and retail banking operation “is likely to gradually benefit from the positive shift in the rate environment”.
BNP said it had achieved €655mn in cost savings in the first nine months of 2024 against a target of €1bn, with a further €345mn expected in the final quarter.
The bank’s common equity tier one ratio fell 30 basis points in the three months to September 30 to 12.7 per cent, but the measure of financial resilience remains well above regulatory requirements and the banks own target.
“BNP remains very attractive in terms of risk [versus] reward as it is very diversified with a solid balance sheet,” analysts at Oddo BHF wrote ahead of the results.
BNP affirmed its full-year guidance, including a target to increase revenues by at least 2 per cent over 2023 levels.