BNP Paribas’ rev­enue down on in­vest­ment bank­ing woes

Euro­pean banks seek ways to boost prof­its at a time of ris­ing fears about bad loans, Brexit and low in­ter­est rates

The Gulf Today - Business - - INTERNATIONAL -

PARIS: A drop in rev­enue at BNP Paribas as its in­vest­ment bank un­der­per­formed over­shad­owed a rise in third-quar­ter profit on Tues­day, send­ing shares in France’s big­gest listed lender lower in early trade.

Paris-based BNP Paribas said that rev­enue fell 0.4 per cent to 10.35 bil­lion eu­ros ($11.76 bil­lion) in the quar­ter, be­low the 10.61 bil­lion ex­pected by an­a­lysts, although growth at the bank’s in­ter­na­tional fi­nan­cial ser­vices di­vi­sion contributed to an over­all net profit rise of 4 per cent to 2.12 bil­lion eu­ros.

Large Euro­pean banks such as BNP Paribas and HSBC - which on Mon­day re­ported higher than ex­pected earn­ings helped by cost­cut­ting - are seek­ing ways to boost prof­its at a time of ris­ing fears about bad loans, Brexit, and ul­tra-low in­ter­est rates.

Last week, Deutsche Bank re­ported a sharp drop in thirdquar­ter profit.

Shares in BNP Paribas fell 3.4 per cent, hav­ing al­ready lost around a quar­ter of their value so far in 2018.

An­a­lysts at Jef­feries wrote in a re­search note that BNP Paribas’ weaker than ex­pected re­sults high­lighted the short-term pres­sures on the bank, although they kept a “buy” rat­ing on the stock.

The bank’s op­er­at­ing ex­penses were up 2 per cent in the quar­ter as it spent more in tech­no­log­i­cal over­hauls.

“How­ever, the sav­ings that will be gen­er­ated go­ing for­ward in the next year should tilt us back again in pos­i­tive ter­ri­tory,” BNP Paribas’ Chief Fi­nan­cial Of­fi­cer Lars Mache­nil said on Tues­day in a TV in­ter­view.

Rev­enues at BNP Paribas’ re­tail banks in France, Bel­gium and Italy re­mained weak as a re­sult of per­sis­tently low in­ter­est rates, while rev­enue from its cor­po­rate and in­vest­ment bank­ing (CIB) unit fell again due to an ad­verse trad­ing environment.

BNP Paribas’ fixed-in­come, for­eign ex­change and com­mod­ity trad­ing were also slow de­spite a slight pickup in US bond trad­ing.

“We know rev­enues in (the in­vest­ment bank­ing) di­vi­sion can be volatile, but we couldn’t find any good sur­prise in the num­bers to­day,” said Pierre Wil­lot, a Paris­based fund man­ager at Mon­taigne Cap­i­tal.

BNP Paribas said it ex­pects trad­ing on stocks to pick up in the fourth quar­ter as a re­sult of mar­ket volatil­ity.

BNP Paribas’ in­ter­na­tional fi­nan­cial ser­vices arm, which has been its growth en­gine in past quar­ters and in­cludes con­sumer lend­ing and US and emerg­ing mar­ket re­tail banks, was one of the group’s bet­ter per­form­ing units in the third quar­ter with a 4.3 per cent rev­enue in­crease.

How­ever, that unit’s per­for­mance nev­er­the­less slowed down in the third quar­ter com­pared to pre­vi­ous quar­ters mainly due to the de­pre­ci­a­tion of the Turk­ish lira.

De­spite the fi­nan­cial cri­sis in Turkey, BNP Paribas’s lo­cal Turk­ish busi­ness, TEB, re­mained prof­itable thanks to sky-high in­ter­est rates in the coun­try.

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