BNP Paribas logo on a bank building in Paris
BNP Paribas beat expectations in its second quarter on Thursday thanks to record share trading volume and a recovery in its retail bank, with group net profit rising by a third, offsetting higher costs associated with the integration of AXA Investment Managers.
Group net profit (RNPG) for the quarter ended at the end of June was 4.35 billion euros, 33.4% more than the 4.21 billion expected on average by 15 analysts polled by BNP Paribas, helped by exceptional gains related to the renegotiation of a partnership with insurance group Ageas.
Revenue at BNP Paribas, the eurozone’s largest bank by balance sheet, rose 12% year-on-year to €14.1 billion, also beating expectations, while management fees rose 10.4%.
In Paris around 0910 GMT, shares were down about 1% at 105.6 euros, compared with a 0.8% fall for the CAC 40 at the same time.
Analysts said costs were a weak point in an otherwise encouraging quarter, highlighting slightly higher-than-expected costs following the acquisition of AXA’s asset management unit, as well as continued weakness at Arval’s long-term vehicle leasing subsidiary.
“Markets are likely to focus on what is perceived as the ‘cost gap’, but we suspect BNP may have taken advantage of its strong earnings performance to anticipate the costs of integrating AXA IM,” Jeffries said in a note. Citi described the results as “good,” highlighting the stock’s strong performance and strong capital formation.
BNP Paribas opens its quarterly results presentation among major European banks as investors wait to see whether it can take advantage of the turbulence caused by the Iran war and a wave of mergers and acquisitions that have benefited Wall Street giants.
Volatility caused by the Iran war has been a boon for trading floors, while mergers and acquisitions and IPOs have driven up investment bank fees.
EQUITY AND PRIME SERVICES AT RECORD LEVEL
Corporate and investment bank (BFI) BNP Paribas, the driving force behind managing director Jean-Laurent Bonnafé’s expansion strategy, recorded better-than-expected 12.7% growth in net banking profit, helped by a 43.2% jump in earnings from shares and Prime services after several quarters of mixed performance.
However, earnings from its fixed income, foreign exchange and commodities (FICC) business were broadly stable, representing an underperforming performance from US peers BNP Paribas, which posted stronger results for the sector.
Several Wall Street giants, including JPMorgan and Bank of America, reported overall investment banking revenue increases of more than 30% this quarter.
CAPITAL INCREASE, GOALS CONFIRMED
BNP Paribas said it had achieved its 13% target for common equity tier 1 (CET1) ratio – a key performance indicator for banking groups – at the end of June, thus ahead of the year-end target mentioned by Jean-Laurent Bonnafé in April.
This capital situation was boosted by the conclusion of a revised partnership agreement with Belgian insurer Ageas in April, which generated an €858 million capital gain.
The French establishment, which confirmed its financial targets for 2026 and 2028, said it would present its next strategic plan in February next year.
Investors are also keeping a close eye on the group’s appeal of a US court decision in the context of a dispute related to the Sudan conflict, in which a US court last October ordered BNP Paribas to pay a total of $20.5 million in damages.
The bank, which said it was appealing the decision, filed an initial brief in May with the U.S. Court of Appeals for the Second Circuit and said it has since received support in the form of amicus curiae briefs from the U.S. and Swiss governments.
(Mathieu Rosemin, French version by Augustin Turpin, edited by Benoit Van Overstraeten)