BNP Paribas beats estimates as trading revenues jump
Q2 equity markets sales up 58%
Q2 French retail NII down 11%
Confirms 2024 targets
Adds analyst comments in paragraphs 5-6
By Mathieu Rosemain
PARIS, July 24 (Reuters) -France's BNP Paribas BNPP.PA posted better-than-expected quarterly earnings on Wednesday 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 net income grew by 21% on a reported basis from a year earlier to 3.4 billion euros ($3.69 billion), its best-ever second quarter, exceeding the 2.91 billion-euro average of 16 analyst estimates compiled by the group.
Group revenues rose about 8% to 12.3 billion euros, beating the 11.9 billion-euro average estimate. The cost of risk, or money set aside for failing loans, was a lower-than-expected 752 million euros.
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.
Jefferies analysts said the figures were a "positive surprise", noting BNP's "very strong" equities business, while JPMorgan and Morningstar analysts called the bank's quarterly results "solid".
"Top line was much stronger in global markets, but also higher for Arval (car-leasing), Belgium and insurance, whilst personal finance was weaker," the JPMorgan analysts added.
BNP said its overall second-quarter investment bank revenues climbed 12% from a year ago to 4.48 billion euros. Rival Deutsche Bank on Wednesday 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, against a close to 22% rise for the STOXX Europe 600 banks index .SX7P, 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 U.S. investment banks outperformed BNP in the second quarter on the back of a strong U.S. economy. Citigroup C.N reported a 60% jump in investment banking revenues while JPMorgan's JPM.N investment banking fees grew 50%. At Wells Fargo WFC.N, investment banking revenue was up 38%.
SLOW RETURN OF IPOS
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, which the bank said would vanish in the third quarter.
The European Central Bank's decision not to pay interest on mandatory deposits banks must keep at the central bank also weighed, while an unspecified "credit situation" in France led BNP to put 123 million euros aside in the quarter.
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 euros.
($1 = 0.9213 euros)
Reporting by Mathieu Rosemain;
Additional reporting by Piotr Lipinski;
Editing by Tommy Reggiori Wilkes and Jamie Freed
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