BNP Paribas has today missed third-quarter profit forecasts, hit by costs tied to integrating AXA Investment Managers and higher provisions for bad loans, including an unnamed issue in its markets unit.
The French bank reported solid growth across its investment bank but the rise in revenues was far lower than at Wall Street rivals after a bumper period of dealmaking and soaring markets.
The euro zone's biggest lender by assets saw its shares hit hard last week when it struggled to reassure investors that it faces limited exposure to Sudan-related litigation, after a US jury found it helped Sudan's government commit genocide by providing banking services that violated American sanctions.
"The recent jury verdict awarding damages to three individual plaintiffs is fundamentally flawed as a matter of fact and law and should be overturned," BNP, which is appealing the court decision, said today.
The bank posted a net profit of €3.04 billion for the July-to-September period, below the company-compiled £3.09 billion average of 16 analyst estimates.
Revenues climbed 5.3% over the period to €12.6 billion, missing the €12.8 billion average estimate.
The bank said the cost of integrating AXA's fund arm, which BNP bought this year for €5.1 billion, is estimated at €690m. The third quarter is the first in which AXA's impact has been included in BNP's results.
Higher regulatory capital requirements are also weighing on returns and delaying the deal's full financial benefits.
The AXA IM deal aims to strengthen BNP's fee-based asset management business and cut reliance on capital-heavy lending, as the bank seeks to close the gap with US giants and Europe's Amundi in the race for scale.
The French lender targets €550m in pre-tax synergies by 2029 and expects an 18% return on invested capital in 2028, rising to 22% in 2029, it said.
The amount of cash BNP provisioned to cover bad loans in the third-quarter increased 24% year-on-year to €905m, matching expectations but driven by the "specific credit situation" in its global markets unit. It did not say what that situation was.
Provisioning in global markets alone shot up to €190m from €11m last year, the bank said.
Across BNP's investment bank, a business chief executive Jean-Laurent Bonnafe has sought to make the engine of the lender's expansion in recent years, revenue rose 4.5% to €4.46 billion, while fixed income, currencies and commodities trading was up 3.7%. Both matched forecasts.
BNP's trading performance lagged Wall Street rivals - Goldman Sachs reported a 17% increase in fixed income currencies and commodities while JPMorgan's markets revenue, spanning equities and fixed income, jumped 25%.
BNP said its commercial and personal banking division benefited from the higher interest rate environment, with its net interest margin in the euro zone - the difference between what it earns on loans and what it pays on deposits - rising by 4.5%.
The bank maintained its 2025 net income target of more than €12.2 billion as well as its guidance for a return on tangible equity of 13% by 2028, driven by its expected turnaround in retail banking profitability.
