European banks once again benefited during the second quarter from the rise in interest rates, which boosted their profitability, a finding to be qualified for certain French players and investment banks.
The leading European bank, BNP Paribas, maintained its rank by publishing a high net profit of 2.8 billion euros between April and June despite a slight decline over one year, followed in France by Crdit Agricole (2.5 billion euros , up 2.1%).
In Spain, the banking giant Santander, with a strong presence in Europe and Latin America, follows with 2.67 billion euros earned over the period (+14%).
Same thing in Italy: Intesa Sanpaolo and Unicredit announced profits close to 2.3 billion euros each, while HSBC – whose headquarters are in London but which generates the bulk of its profits in Asia – saw its profits climb 27% over one year over the period, 6.6 billion dollars.
These are remarkable results, well beyond analysts’ expectations, particularly in terms of revenues and the cost of risk, that is to say the provisions for default risk, commented to AFP David Benamou, Chief Investment Officer of Axiom Alternative Investments.
Successive increases in rates by the European Central Bank (ECB) allow banks to lend more to companies and individuals, enough to increase their margins.
Air pocket
The other French banks, however, were a little behind in the second quarter, paradoxically suffering from the rise in interest rates, such as BPCE (973 million euros in net profit, down 18% over one year).
Despite profits, all recorded net banking income, equivalent to turnover for the sector, in decline.
This temporary air pocket, according to Rafael Quina, an analyst for the Fitch rating agency, is explained by the fact that France stands out with a relatively slow repricing of the credit portfolio.
In other words, the loans being essentially granted at a fixed rate, only the new ones can bring more money to the banks, which at the same time must better remunerate all the savings placed with them.
Investment banks suffered even more in the spring. The Franco-American flagship Lazard, for example, posted a net loss of $124 million between April and June, after a first quarter already in the red.
Tighter financial conditions and geopolitical uncertainty have put a chill on the M&A market, and therefore on its corporate advisory business.
Its arch-rival Rothschild, more diversified, managed to stay above water but saw its net profit halved between January and June, to 128 million euros.
The trend is also visible across the Atlantic. Goldman Sachs’ net profit thus fell by 62% in the second quarter to 1.1 billion dollars, affected by the lack of merger and acquisition operations as well as by less activity in asset management.
Fines and provisions
During the quarter, several banks had to put money aside to deal with litigation or the risk of non-payment by customers.
The leading German banking group Deutsche Bank has thus reported major litigation and a rise in the cost of risk, enough to cap its profit at 763 million euros (-27%).
These cases include a settlement in a class action lawsuit brought by the victims of US financier Jeffrey Epstein and a fine in the United States for failing to take sufficient action against money laundering.
In France, it was the lenders of the distributor Casino, strangled by a debt of 6.4 billion euros and engaged in a heavy restructuring, who had to resign themselves to passing part of their receivables to losses and profits.
As for the Swiss banking giant UBS, which must digest the absorption of its former rival Credit Suisse on the verge of bankruptcy at the start of the year, it preferred to postpone the publication of its figures, from July 25 to August 31.