BNP Paribas, France's biggest bank, plans to expand its investment banking activity in Europe as competitors retrench, it said on Monday, part of a strategy to offset weak revenue in domestic retail markets. The bank aims to increase the number of clients in northern Europe, including Germany, the United Kingdom and Scandinavia, and expects to add 350 new customer groups by 2020, it said at an investor day in Paris.
It fleshed out to investors its longer-term strategy, announced in February, which will include continuing to close retail branches and reducing headcount through natural attrition. Yann Gerardin, head of corporate and institutional banking, said clients were worried about European banks' commitment to investment banking operations but BNP planned to continue competing in a wide range of activities.
"In terms of retrenching of some of our competitors, we have an opportunity to attract even more clients," he said. European investment banks have lost market share in recent years to their US rivals, with Wall Street firms taking the top three spots for investment banking fees in Europe in 2016.
However, BNP has performed better than some of its regional peers, and its investment banking arm, CIB, earned more fees than both Deutsche Bank and Barclays in Europe last year, according to Thomson Reuters data. "The future of CIB ... is also going to be a war on costs, the more efficient we are, the more likely we are to compete with the best American competitors," Gerardin said.
The bank in February announced plans to spend 3 billion euros ($3.2 billion) from 2017-2020 to boost profitability, including investing in digital technologies to boost cost savings. BNP Paribas trade union FO said on Monday that the bank planned to close 200 retail branches in France and reduce staff in its retail branch networks by 2 to 4 percent over two years.
BNP declined to comment on the numbers, but the investor day presentation said a headcount reduction in France would come through "natural turnover". The bank reiterated its targets to boost dividend payouts and increase its return on equity to 10 percent from 9.4 percent. It said its domestic markets, such as France and Italy, would eke out 0.5 percent revenue growth annually from 2017 till end-2020.
However, it signalled that its revenue targets were based on prudent macro assumptions taken a few months ago and that the recent steepening of the yield curve could provide some "upside" in the future. Like other French banks, BNP Paribas faces a weak domestic retail market and is looking at a year of political uncertainty, with presidential elections looming and far-right leader Marine Le Pen - who has advocated a retreat from the euro currency - performing strongly in polls.
Shares in BNP Paribas fell 0.3 percent to 60.1 euros by 1555 GMT, against a little changed broader market. "They are on a defensive side in terms of ambitions, it is a business development plan that targets operational efficiency, first of all, as the previous one did," Gildas Surry, a senior analyst at Axiom Alternative Investments.
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