BNP's Egan Says Turmoil Has Been Good News for Trading at Banks

(Bloomberg) -- The recent volatility in markets has sparked a rebound in trading revenue for global banks, as clients turn their attention to risks such as Italy’s political crisis and step up their hedging, a BNP Paribas SA executive said.

“The industry has seen a pick-up in activity this quarter,’’ Martin Egan, vice-chairman of a global markets board that focuses on the French bank’s strategic clients, said in an interview on Thursday. “Business is generally quite positive. We definitely will see, and have seen of late, more sensitivity of our global client base around the desire to hedge risk.”

He declined to be more specific about BNP Paribas’s own results beyond saying that the quarter so far has been “constructive.”

BNP Paribas lagged Wall Street rivals in the first quarter as trading income fell 15 percent. The firm blamed tepid demand for rates and foreign-exchange dealing. Since then, emerging markets have been roiled by events such as Argentina’s emergency interest-rate increase and Turkey’s lira crash, while this week, the renewed prospect that Italy might crash out of the euro sparked historic moves in bond markets. Threats of a global trade war have added to the tensions.

“Naturally, if you see more volatility, you see increased market activity,” Egan said. Market participants are increasingly hedging their risk across different asset classes, he said.

“There’s a lot of headlines for the market,” Egan said. “The market environment you have today is more nervous across the board. The Italian situation will be a key focus for clients,” though contagion from that crisis is manageable so far, he said.

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