BNP Paribas’s investment banking arm boosts revenues – Money Perception

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BNP Paribas reported a robust performance in its investment banking division in the second quarter, as the group attempts to become one of the top three trading and corporate banking houses in Europe. The Paris-based bank was able to shrug off a drop in fixed-income trading that has hit much of the sector in the quarter thanks to the health of its equity and prime services business, where revenues rose 26 per cent. The group’s corporate and institutional banking division (CIB), its investment banking arm, reported a 4.6 per cent rise in revenues to €3.2bn and a 49 per cent rise in pre-tax income to €1.3bn. This all helped BNP to report a 17 per cent rise in quarterly profits, excluding one-time items, at a time when some European rivals and Wall Street banks reported a more mixed performance. On Friday Barclays reported a heavy group loss, with revenues in the investment bank falling 10 per cent and profits down 30 per cent. Results by Deutsche Bank earlier in the week fell well short of analysts’ expectations. Including exceptional items, which include a gain from selling shares in Visa Europe last year, BNP’s net income fell 6.4 per cent to €2.4bn in the quarter. But this still was well ahead of analysts’ expectations, who had predicted €1.9bn. “CIB had a very good quarter,” the bank said in a statement on Friday, adding that the group was continuing to cut costs and reduce the cost of risk. Maxence Le Gouvello Du Timat, analyst at Jefferies, said it was a “good set of results driven by market-related activities” while Azzurra Guelfi at Citi agreed that the trend in CIB was “better than expected”. Jean-Laurent Bonnafé, the chief executive, in May said he wanted the bank to become one of the top three investment banks in Europe by winning new corporate clients and doing more business with those it already has.  Executives at BNP say privately that, at a time when many of Europe’s investment bank’s are still in the midst of deep restructuring, there is an opportunity for the group to gain market share.  Since being fined almost $9bn by US regulators in 2014, BNP has rebounded strongly, raising its dividend and boosting profits. Shares in the company are up 53 per cent over the past 12 months. On Friday BNP reported that its European retail business remained sluggish amid low interest rates, with quarterly revenues flat and pre-tax profits down 2.3 per cent to €1bn. In France the group’s retail net income fell 6.8 per cent. The revenues of the operating divisions were up thanks to the good business drive and operating expenses were down as a result of the implementation of the transformation plan JEAN-LAURENT BONNAFÉ, CHIEF EXECUTIVE The bank on Friday said that cost cutting was continuing to bear fruit as corporate and investment bank expenses fell 6 per cent. Mr Bonnafé said: “The revenues of the operating divisions were up thanks to the good business drive and operating expenses were down as a result of the implementation of the transformation plan.” This year, BNP said it would cut as many as 675 jobs over the coming three years in its CIB unit, as it seeks to make €1bn of annual cost savings in the division by 2019.  BNP aims to raise its return on equity from 9.4 per cent last year to above 10 per cent by 2020 and to increase its common equity tier one ratio — a benchmark of balance sheet strength — from 11.5 per cent to above 12 per cent.