BNP Paribas Debt Trading Losing Run Extended in Quiet Market

(Bloomberg) -- The bond-trading gloom continues at BNP Paribas SA. France’s biggest lender joined Deutsche Bank AG in posting steep declines for fixed-income trading in the third quarter, complicating Chief Executive Officer Jean-Laurent Bonnafe’s plans to meet 2020 targets.

Key Insights

• The 15 percent drop in revenue from buying and selling bonds, currencies and commodities in the three months through September was in line with analysts’ estimates and similar to what happened at BNP’s German rival. But it extends that business’s losing streak into a sixth straight quarter.
• Including less-than-estimated revenue from equity trading, which rose just 4 percent, BNP’s global markets business posted its second-worst quarterly revenue since early 2016. The firm blamed a lackluster financial market environment in Europe.
• Analysts may focus on the quality of other numbers: while net income rose 4 percent to about 2.1 billion euros, slightly ahead of estimates, the bank said that excluding exceptional items it was little changed.
• More positively the bank’s core tier 1 ratio -- a key metric -- is edging closer to its target range after the sale of a stake in First Hawaiian bank.

Market Reaction

• European banking stocks are trading at depressed levels because of a mix of geopolitical risks, mounting worries about economic growth and low rates. BNP Paribas is no exception: its shares have lost almost a quarter of their value this year.

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• BNP Paribas’s Italian unit showed little sign of being affected by recent turbulence in the country. Pretax profit, loans and deposits rose, while bad-loan provisions improved.
• The lender reported a one-off gain from the sale of a stake in First Hawaiian Bank of about 286 million euros in the third quarter. Bonnafe is focusing on organic growth and has signaled that he has no interest in large M&A while the bank concentrates on its digital transformation.
• The bank last year set 2020 targets including increasing annual revenue by at least 2.5 percent on average, with faster growth at international financial services and the investment bank. The lender recently elevated investment banking head Yann Gerardin to deputy chief operating officer, making him a contender to succeed Bonnafe.
• Low rates continue to drag on French retail banking revenue, which fell about 1 percent to 1.5 billion euros, in line with estimates.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Andrew Blackman

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