BNP Paribas' retail weakness takes shine off equity trading boost

By Mathieu Rosemain

PARIS (Reuters) -France's BNP Paribas exceeded expectations with a big jump in earnings on Wednesday thanks to a boost in equities trading, although a sharp drop in net interest income at its domestic retail business unnerved investors.

The euro zone's biggest bank said net income grew by 21% on a reported basis from a year earlier to 3.4 billion euros ($3.69 billion), its best-ever second quarter, exceeding the 2.91 billion-euro average estimate of 16 analysts compiled by the group.

Group revenues rose about 8% to 12.3 billion euros, beating the 11.9 billion-euro average estimate.

BNP's results were aided by a 58% jump in sales from equity and prime brokerage services, which involve facilitating the buying, selling and lending of shares and providing other services to clients such as hedge funds.

Yet BNP's shares fell 2% in early Paris trading, after it said its French retail division was hit by an 11% drop in net interest income (NII) - the difference between what banks earn on loans and what they pay on deposits.

Barclays' analysts said in a note that BNP reported "mixed results", adding the bank's retail activities in France and Italy looked "poor."

BNP said its overall second-quarter investment bank revenues climbed 12% from a year ago to 4.48 billion euros. Rival Deutsche Bank on Wednesday reported a 10% rise in second-quarter investment banking revenues.

These results are a boost for CEO Jean-Laurent Bonnafe, who has made its the division a key driver of growth plans to lift the bank's underperforming shares.

The bank's stock price has risen just 3.3% in 2024, against a close to 22% rise for the STOXX Europe 600 banks index <.SX7P>. It has partly been dragged down by the lender's underwhelming performance and by recent political uncertainty following French President Emmanuel Macron's decision to call snap parliamentary elections.

BNP, which forecast annual revenues from market activities rising by more than 7.5% on average over 2021-2025, delivered a better performance at its equities trading business in the second quarter than some rivals on Wall Street.

Yet overall, the largest U.S. investment banks outperformed BNP in the second quarter on the back of a strong U.S. economy.

Total investment banking revenues, including trading, of the five biggest Wall Street banks (Goldman Sachs, Bank of America, Citi, JPMorgan, Morgan Stanley) grew by 16% on average over the period, according to Jefferies.

SLOW RETURN OF IPOS

France has seen a slow return of initial public offerings (IPO) in 2024, with the listings of Exosens and Planisware, for which BNP acted as global coordinator.

BNP's second-quarter sales from trading in fixed income, currency and commodities (FICC) fell 7%, as demand retreated, in particular for commodities.

BNP's French retail activities notably suffered from the cost of inflation hedges against the regulated remunerating rate of France's most popular savings account, Livret A, which the bank said would vanish in the third quarter.

The European Central Bank's decision not to pay interest on mandatory deposits banks must keep at the central bank also weighed, while an unspecified "credit situation" in France led BNP to put 123 million euros aside in the quarter.

Rising NII has swelled bank coffers this year, but analysts are concerned about it slowing as the ECB reduces interest rates.

BNP confirmed its full-year targets, including revenue growth of more than 2% compared to 2023 distributable revenues and group net income of more than 11.2 billion euros.

($1 = 0.9213 euros)

(Reporting by Mathieu Rosemain; Additional reporting by Piotr Lipinski;Editing by Tommy Reggiori Wilkes, Jamie Freed and Bernadette Baum)