Surge in trading revenues helps BNP Paribas beat expectations
A surge in currency and commodity trading and lower than expected provisions for bad loans helped BNP Paribas beat earnings expectations for the third quarter.
France’s biggest bank reported a 2.3 per cent drop in net income, which fell to €1.9bn (£1.7bn) for the three months to September – beating analysts expectations of €1.5bn.
Overall revenues were broadly flat at €10.89bn. However revenues at BNP’s investment bank climbed 17 per cent for the quarter to €3.4bn, while fixed-income trading revenue jumped by 36 per cent “with a good level of client activity on the rate and forex markets”.
BNP Paribas said more companies were looking to raise equity or bond financing to strengthen their balance sheets during the Covid-19 crisis.
“BNP Paribas demonstrates its high resilience thanks to its financial solidity, its diversification, and the power of execution of its platforms,” said chief executive Jean-Laurent Bonnafe.
The French lender maintained its forecast that annual profit would fall between 15 and 20 per cent for the full-year. Profits fell just over 13 per cent for the first nine months of 2020.
Shares in BNP Paribas rose 5.35 per cent in morning trading following the results.
BNP said its common equity tier 1 ratio – a key measure of financial strength – was up by 20 basis points to 12.6 per cent by 30 September, ahead of expectations of 12.35 per cent.
The bank has put 50 per cent of its profits aside until it can resume paying dividends, after regulators curbed payouts earlier this year amid the initial fallout from Covid-19.
The bank’s cost of risk, which reflects provisions for loans that may turn sour, was up year-on-year by 47 per cent to €1.24bn, but came in lower than in the second quarter and was below analysts’ expectations.
Bumper trading volumes have helped many major European banks to produce stronger-than-expected third-quarter earnings, while many also now have a more optimistic outlook on expected loan losses caused by the pandemic.
However lenders are struggling to cope with record low interest rates, which cuts into income from lending. BNP Paribas’ net interest income, which broadly reflects the difference between revenue from interest charged on a loan and the cost of holding a deposit, fell 5.5 per cent in the third quarter in its French retail business.
Lenders’ third-quarter performance will become an important gauge of financial strength ahead of December when the European Central Bank is expected to revisit its recommendation for eurozone banks not to pay dividends.