BNP Paribas's Trading Revenue Falls on Fixed-Income Slump

(Bloomberg) -- BNP Paribas SA failed to keep pace with its Wall Street rivals in the first quarter as revenue from debt trading tumbled.

Trading income at the global markets unit fell 15 percent to 1.5 billion euros ($1.8 billion) from a year earlier, the Paris-based lender said Friday, missing analysts’ estimates. Sales from fixed-income, currencies and commodities plunged by almost a third, outweighing a 19 percent increase from equities.

BNP Paribas blamed the debt-trading slump on tepid demand from clients for rates and foreign exchange dealing. Stock trading rose as a pickup in volatility drove demand for equity derivatives, products that clients can use to speculate on price moves or protect their holdings. Growth at BNP’s corporate and investment bank, led by Yann Gerardin, is a central part of BNP’s ambition to increase revenue and improve profitability.

“The market context was lackluster in Europe compared to the first quarter 2017,” Chief Executive Officer Jean-Laurent Bonnafe said in a statement. Even so, “the results are in line with the trajectory of the 2020 plan and the achievement of its targets,” he said.

BNP Paribas’s trading performance lagged behind U.S. peers. A 32 percent jump in equities revenue propelled growth in the quarter at the top five Wall Street firms including JPMorgan Chase & Co. and Goldman Sachs Group Inc., while fixed-income trading at the largest U.S. banks was little changed.

SocGen Disappoints

Trading results at French rival Societe Generale were even more dismal as the bank shuffles top management after the surprise exit of investment-banking head Didier Valet. Revenue from equities trading and prime services fell 11 percent, the Paris-based bank said Friday, while sales from dealing with bonds, currencies and commodities dropped by almost a third. Both missed estimates.

BNP shares sank as much as 3.5 percent and were trading 3.1 percent lower at 61.43 euros as of 9:39 a.m. in Paris. SocGen fell as much as 7.4 percent and was trading 6.9 percent lower at 41.79 euros.

BNP Paribas is seeking to become one of the top three European corporate and investment banks, partly by growing in Germany, the U.S. and Asia. Bonnafe is also speeding up technology spending while seizing opportunities for small and mid-sized acquisitions. Last month, the lender agreed to buy Raiffeisen Bank International AG’s Polish consumer-banking unit, consolidating its position as the sixth-largest bank in the country, ranked by assets.

Consumer Bank

The French consumer-banking unit posted a 1.6 percent decline in revenue to 1.52 billion euros, in line with estimates, hurt by a drop in mortgage refinancings and early repayment penalties. Still, outstanding loans jumped 7.2 percent, buoyed by the country’s improving economy. The Italian and U.S. networks also posted lower quarterly revenue from year-earlier levels.

Net income fell 17 percent to 1.57 billion euros in the quarter, topping estimates, as bad-loan provisions rose less than analysts forecast. Higher costs for adapting to new technology and regulation, including levies for the European Union’s Single Resolution Fund, weighed on earnings.

Here are some highlights from BNP’s earnings:

  • Total revenue fell 4.4 percent to 10.8 billion euros, missing analyst estimates
  • Total costs rose 1.7 percent to 8.26 billion euros
  • Revenue at corporate and investment bank fell 9.8 percent to 2.91 billion euros
  • Pretax earnings at the CIB division tumbled 28 percent to 558 million euros.

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