BNP Paribas Prop-Trading Arm Lost $30 Million Before Closing

(Bloomberg) -- A BNP Paribas SA division created to make speculative bets for the bank’s own account lost tens of millions of dollars last year as trading revenue slumped amid volatile markets, leading executives to shutter the business.

Opera Trading Capital, which ceased trading in January, posted a loss of 26 million euros ($30 million) for 2018, filings show. Net banking income before operating expenses slumped 91% to less than 3 million euros, the worst result since Opera began trading in 2015, in a year that started with a sudden spike in volatility, moved on to repercussions from Turkish economic turmoil and was capped by a plunge in U.S. stocks.

Opera’s disappointing performance was part of a wider trading slump at BNP that prompted Chief Executive Officer Jean-Laurent Bonnafe to overhaul the Paris-based bank’s markets division in January and push through a fresh round of cost cuts. The closure -- and the almost simultaneous wind-down of a similar unit run by Societe Generale SA -- also marked the end of French banks’ ambitions for proprietary trading; prop desks were banned for deposit-taking lenders in the U.S. after the financial crisis, but only restricted in Europe.

BNP executives have completed the wind-down of Opera, according to Alexandra Umpleby, a spokeswoman for the lender in London. She declined to comment further.

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The accounts also show how Opera increased in size last year, by contrast with SocGen’s prop desk, called Descartes Trading, which was being pared back by the bank’s executives. Descartes lost about 18 million euros last year, Bloomberg reported in July.

Assets at the BNP unit climbed 4% to 2.6 billion euros as traders piled into “unlisted” bonds and other fixed-income securities, filings show. The division’s portfolio of interest-rate derivatives -- complex products that investors can use to profit from changes in the direction of interest rates -- swelled 14% to a notional value of 393 billion euros.

Most of Opera’s traders have since departed BNP for roles at hedge funds. Stephane Liot, who had overseen the business, joined Brevan Howard Asset Management as chief operating officer for trading in June.

To contact the reporter on this story: Donal Griffin in London at dgriffin10@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Keith Campbell, Marion Dakers

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