BNP Paribas earnings boost clipped by charges

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Litigation and restructuring costs dragged on BNP Paribas’s revenue and net income in the second quarter, even as the French bank profited from rising interest rates across its businesses and charges on bad loans fell. 

The eurozone’s biggest bank by market value, which was boosted by a big gain from selling its US unit Bank of the West a quarter earlier, on Thursday posted a near 5 per cent drop in net profit from a year earlier to €2.8bn, while revenue was down 1.5 per cent to €11.4bn.

BNP still beat analysts’ expectations on both counts and said without the one-off charges, its sales would have risen from a year earlier. But it set aside €125mn for an unspecified legal provision and an additional €151mn for what it said were exceptional costs linked to restructurings and IT. The bank is cutting back and reshaping some of its consumer finance teams, including through voluntary departures in France.

Under chief executive Jean-Laurent Bonnafé, BNP has sought to position itself as Europe’s go-to corporate and investment bank, outside the big US banks that dominate the industry. It has long vaunted a diversified model that is now helping it ride out some of the highs and lows of historically elevated interest rate rises in the US and Europe. These have brought blips with them for some rivals and worries over strains in sectors such as commercial real estate.

In the second quarter, BNP benefited from underlying momentum across businesses, including in its Arval car leasing unit, and as interest rate rises boosted earnings in France and Italy, where it has a big commercial lending presence.

Like Wall Street peers, the French bank had a mixed quarter in its corporate and investment bank, which posted a 2.3 per cent fall in revenues. Earnings were weaker in its markets business in particular, with a 18 per cent drop in fixed-income, currencies and commodities revenues that echoed even steeper slowdowns at Goldman Sachs and Morgan Stanley. But BNP did well in bond issuance, sustaining a much stronger performance in what it calls its global banking unit. 

BNP is now looking to improve its profitability and expand revenues, including as it reinvests some of the gains from its $16.3bn sale of Bank of the West, though Bonnafé has excluded making big acquisitions with his war chest. 

Part of the funds are going to share buybacks, including another €2.5bn chunk out of a total €5bn that the bank said it would launch in August.

BNP’s return on tangible equity reached 13.6 per cent in the second quarter, hitting its longer-term goal of above 12 per cent to 2025. 

The bank’s cost of risk fell just over 9 per cent from a year earlier to €689mn, reflecting a low level of provisions set aside on souring loans.

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