by Mathieu Rosemain
(Reuters) – BNP Paribas reported on Thursday a drop in its results while beating expectations in the first quarter, the resilience of “Global Banking” activities and the decline in operational expenses having offset the severe fall in revenues of its activities on rates, currencies and commodities (FICC).
The largest bank in the euro zone recorded a drop in its group share of net profit in the first quarter, down 2.2% year-on-year to 3.10 billion euros. Analysts expected an average of 2.4 billion euros, according to a consensus established by the company.
The group also reported net banking income of 12.5 billion euros for the period, down 0.4% but slightly above the 12.2 billion euros expected by analysts.
Activities on rates, currencies and commodities (FICC) showed a sharp slowdown, with revenues falling 20.4% to 1.60 billion euros.
In a presentation, BNP Paribas speaks of “normalization” from a high base in the first quarter of 2023 in the Europe, Middle East and Africa (EMEA) region.
This performance contrasts with that of the major Wall Street banks whose trading revenues fell but to a lesser extent – 3% on average – against a backdrop of reduced volatility in the financial markets.
“Investors could quibble over the performance of the CIB [banque d’investissement]” with the more marked fall than expected in FICC’s activities, Jefferies analysts underlined in a note, adding however that BNPP had demonstrated good cost control.
Several other analysts said they were impressed by BNP Paribas’ cost control, which put the pre-tax effect of efficiency initiatives in 2024 at +€400 million.
OPTIMISTIC FORECAST
BNP Paribas, which disappointed expectations when publishing its annual results in February, confirmed its objective of a distributable net profit higher than that of 2023, which was 11.2 billion euros.
The banking group also announced that it expects revenues to increase by 2% compared to 2023 distributable revenues, or 46.9 billion euros.
Managing Director Jean-Laurent Bonnafé went further during a conference call with analysts.
“To say the bottom line will be higher than 2023 is kind of a minimum,” he said.
“And 3% could be considered a sort of central scenario, even if we are committed to producing more than 2%,” he added of the revenue forecast.
These comments caused the stock price of BNP Paribas to rise, which gained 0.88% to 68.33 euros at 4:37 p.m. after having gained more than 2.5% earlier. The Stoxx banks index gained 0.5% at the same time.
RETAIL BANK OF FRANCE
The publication of quarterly bank results is an opportunity for investors to check whether the income boom linked to high interest rates is running out of steam.
In the first quarter, the net banking income of commercial banks increased by 1% to 4.2 billion euros, above analysts’ expectations, but BNP reported an unfavorable base effect linked to inflation hedges in France.
In commercial banking in France, interest income fell by 8%, also penalized by the non-remuneration of mandatory reserves.
France’s retail banking business, usually less profitable than in other European countries due to strict rules on savings accounts, has proven difficult for BNP Paribas.
Last month, the head of commercial banking in France, Marguerite Bérard, unexpectedly announced her departure as she was seen by some industry sources as a possible contender to succeed chief executive Jean-Laurent Bonnafé.
The investment bank’s net banking income (CIB) fell by 4% while the “Global Banking” activity – which includes bond issues, syndicated loans and cash management – closed the quarter up by 6%, a record according to BNP.
The cost of risk stood at -640 million euros in the first quarter, compared to -819 million expected by analysts.
(Written by Mathieu Rosemain, Augustin Turpin and Blandine Hénault for the French version, edited by Kate Entringer)
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