France's BNP Paribas has today posted better-than-expected quarterly earnings after investment banking revenue jumped due to a surge in equities trading, offsetting a sharp drop in net interest income at its French retail business.
The euro zone's biggest bank by market value said second-quarter net income grew by 21% on a reported basis from a year earlier to a record €3.4 billion, exceeding the €2.91 billion average of 16 analyst estimates compiled by the group.
Group revenues rose about 8% to €12.3 billion, beating the €11.9 billion average estimate. The cost of risk, or money set aside for failing loans, was a lower-than-expected €752m.
BNP's results were aided by a 58% jump in sales from equity and prime brokerage services, which involve facilitating the buying, selling and lending of shares and providing other services to clients such as hedge funds.
BNP said its overall second-quarter investment bank revenues climbed 12% from a year ago to €4.48 billion. Rival Deutsche Bank today reported a 10% rise in second-quarter investment banking revenues.
BNP's results will be a boost for CEO Jean-Laurent Bonnafe, who has made its investment banking division a key driver of growth plans but has struggled to lift the bank's shares in recent months.
The bank's stock price has risen just 3.3% in 2024, compared to a close to 22% rise for the STOXX Europe 600 banks index, dragged down partly by the lender's underwhelming performance and partly by recent political uncertainty following French President Emmanuel Macron's decision to call snap parliamentary elections.
BNP, which forecast annual revenues from market activities rising by more than 7.5% on average over 2021-2025, delivered a better performance at its equities trading business in the second quarter than some rivals on Wall Street.
Yet overall, the largest US investment banks outperformed BNP in the second quarter on the back of a strong US economy.
Citigroup reported a 60% jump in investment banking revenues while JPMorgan investment banking fees grew 50%. At Wells Fargo, investment banking revenue was up 38%.
France has seen a slow return of initial public offerings (IPO) in 2024, with the listings of Exosens and Planisware, for which BNP acted as global coordinator.
BNP's second-quarter sales from trading in fixed income, currency and commodities (FICC) fell 7%, as demand retreated, in particular for commodities.
The bank's retail division was hit by an 11% drop in net interest income (NII) - the difference between what banks earn on loans and what they pay on deposits - in France.
BNP notably suffered from the cost of inflation hedges against the regulated remunerating rate of France's most popular savings account, Livret A, and the European Central Bank's decision not to pay interest on mandatory deposits banks must keep at the central bank.
Rising NII has swelled bank coffers this year, but analysts are concerned about it slowing as the ECB reduces interest rates.
BNP confirmed its full-year targets, including revenue growth of more than 2% compared to 2023 distributable revenues and group net income of more than €11.2 billion.
