BNP Paribas buoyed by CIB

French bank BNP Paribas posted forecast-beating quarterly profit on Wednesday, boosted by its corporate and investment banking (CIB) business, lifting its share price by more than 3%. The strong performance from France's biggest bank comes against a backdrop of a sector still struggling to come to terms with prolonged low interest rates and only a week after German rival Deutsche Bank reported bigger than expected losses as it undergoes one of the biggest overhauls to an investment bank since the financial crisis.
Favourable market conditions and the first effects of a new 350 million euro ($390 million) cost-cutting plan launched by BNP in February beefed up profitability at its CIB business. The CIB numbers lifted the French bank's overall performance for a second consecutive quarter, with net profit up 3.1% at 2.47 billion euros ($2.8 billion) on revenue of 11.22 billion euros.
Analysts from Credit Suisse, UBS and Jefferies respectively expected net profit of 2.06 billion, 2.28 billion and 2.21 billion euros. "Due to its diversified business, it is rare to have BNPP firing on all its revenue cylinders at the same time," said KBW analyst Jean-Pierre Lambert, adding that he expects the bank to outperform in a volatile environment thanks partly to its strict cost discipline.
Other large banks, such as Citigroup, have reported signs of pressure in their corporate and investment banking arms, BNP Paribas has managed to keep that part of its business relatively strong. Overall revenue at its CIB unit rose 4% to 3.1 billion euros and pretax profit grew by 6.2% to 1.06 billion euros.
The French lender, the second-largest eurozone bank by market capitalisation behind Spain's Banco Santander, still struggled to make money on its market businesses, with equity and prime brokerage services posting a 14% revenue drop. As interest rates in Europe remain at rock-bottom levels and the outlook in the US has moved towards lower rates, BNP's retail operations remain sluggish.
Pretax profit at its retail banks in Western Europe shrank 0.9% to 1.12 billion euros. Its international financial services division, which groups insurance, non-Western European retail, international consumer credit and other businesses, also reported a decline in pretax profit, down 1% at 1.44 billion euros.
The French bank also booked a 500 million euro charge on its US retail unit BancWest in expectation of lower US interest rates. Over the second quarter, BNP Paribas raised its common equity tier 1 ratio to 11.9% from 11.7% three months earlier and is likely to reach 12% this year, a year earlier than previously targeted, CEO Jean-Laurent Bonnafe said.