Bnp paribas act.a: The rise in rates is driving up the profits of most European banks

(BFM Bourse) – The results of banks on the Old Continent were supported by the successive increases in ECB rates. But in France, some establishments have paradoxically suffered from the monetary tightening of the European institution.

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 first European bank, BNP Paribas, held its rank by publishing a high net profit of 2.8 billion euros between April and June despite a slight erosion over one year, closely followed in France by Crédit Agricole (2.5 billion euros). 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 in Italy: Intesa Sanpaolo and Unicredit reported profits close to 2.3 billion euros each, while HSBC – headquartered in London but generating the bulk of its profits in Asia – saw its earnings climb 27% year on year over the period, to $6.6 billion.

“These are remarkable results, well beyond analysts’ expectations”, in particular in terms of income and the cost of risk, that is to say the provisions for the risk of non-payment, 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 expensively to businesses and individuals, enough to increase their margins.

A temporary “air hole”

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 a net banking income, equivalent to the 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 for “a fairly slow repricing of the credit portfolio”. In other words, since the loans are essentially granted at a fixed rate, only the new credits can bring in more money for 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, published a net loss of 124 million dollars 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 more diversified long-time rival Rothschild managed to stay above water but saw its net profit halve between January and June, to 128 million euros.

The trend is also visible across the Atlantic. Goldman Sachs’ net profit fell 62% in the second quarter to $1.1 billion, affected by the lack of merger and acquisition transactions as well as lower activity in asset management.

Provisions to deal with unpaid bills

During the quarter, several banks had to put money aside to deal with litigation or the risk of non-payment from customers. The first 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 American financier Jeffrey Epstein as well as a fine in the United States for not having taken sufficient measures 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 claims to profit and loss.

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.

(With AFP)

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