BNP Paribas SA relied on its traditional strength in fixed-income and higher interest rates to lift revenue in a challenging first quarter for banks.
(Bloomberg) — BNP Paribas SA relied on its traditional strength in fixed-income and higher interest rates to lift revenue in a challenging first quarter for banks.
Income from debt trading rose 9% and global banking, which houses the capital markets and advisory businesses, jumped 16% from a year earlier, BNP said in a statement Wednesday. That and higher lending income at the retail unit helped offset declines in equities trading, a business Chief Executive Officer Jean-Laurent Bonnafe has prioritized for growth.
BNP restated earnings for last year after adapting new accounting standards and closing the sale of its Bank of the West subsidiary in February, making a comparison with analysts’ estimates difficult. The disposal lifted net income by almost €3 billion in the quarter, even as costs rose and the end of cheap central bank funding for lenders weighed on revenue.
The Bank of the West sale has handed Bonnafe a giant war chest for acquisitions and payouts to shareholders. The CEO, in the role for more than a decade, has made a series of bolt-on purchases in the past, including in equities, but shied away from larger targets in favor of buybacks, even as rivals step up deals.
UBS Group AG in March agreed to buy Credit Suisse Group AG in a government-brokered rescue that’s changing the landscape of Swiss banking. Deutsche Bank AG last week announced its biggest purchase in more than a decade with the acquisition of London-based boutique Numis Corp.
Bonnafe had been taking over assets and clients from both Credit Suisse and Deutsche Bank in prior years as those firms cut back equities trading. Yet that business at BNP struggled in the first quarter, with revenue declining 20%. That compares with an average 14% drop on Wall Street.
All told, BNP’s trading unit still did better than most peers, as did the global banking business, though the French lender includes transaction banking in that division, making a comparison difficult.
Outside the investment bank, BNP is starting to see the tailwind from rising interest rates, which helped lift net interest income by 11% at the Commercial, Personal Banking and Services unit. In a quarter where several regional US lenders collapsed and Credit Suisse was forced into a rescue, BNP saw deposits increase 1.2% from a year earlier.
While the Bank of the West sale lifted net income, operating income declined in part because of restructuring costs at the consumer finance unit. Revenue was impacted by adjustments of hedges, after the European Central Bank late last year toughened terms on a cheap source of longer-term funding for lenders, BNP said.
Bonnafe has said he only wants to use part of the proceeds from Bank of the West for deals, with the rest earmarked for shareholder distributions. BNP has already embarked on the first tranche of a €5 billion share buyback announced in February, with the second tranche expected later this year.
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