BNP Paribas thrived in the second quarter, shares rise

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A BNP Paribas logo is seen on its display space at the Viva Technology conference on innovation and startups at the Porte de Versailles exhibition center in Paris, France, June 15, 2022. REUTERS/Benoit Tessier

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  • Q2 net profit up 9.1% to 3.2 billion euros
  • Q2 revenue up 8.5%, outpacing expenses
  • Shares up about 4%

PARIS, July 29 (Reuters) – French bank BNP Paribas (BNPP.PA) reported better-than-expected profit for the second quarter after provisions for bad loans fell and business in both investment and retail businesses despite of hot global markets and an economic slowdown remained buoyant.

France’s largest listed lender announced on Friday that its net income rose 9.1% year-on-year to 3.2 billion euros ($3.25 billion). An informal consensus forecast circulating among analysts saw net earnings of just about €2.7 billion.

BNP shares are up over 4% in morning trade, outperforming the European banking sector (.SX7E) which rose about half as fast.

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Revenue rose 8.5% to €12.78 billion, faster than operating expenses, which rose 7.6% to €7.72 billion.

“There’s a positive ‘jaw effect,'” with revenue growth outpacing spending, noted Arnaud Journois, credit analyst at DBRS Morningstar.

“But while these results are good, that doesn’t mean the outlook has improved,” he added, citing the provisions the bank has made to cover potential loan losses should the euro-zone economy deteriorate further .

“It’s possible that the third and fourth quarters won’t be as good for European banks,” he warned.

Europe’s lenders offered some upside surprises in earnings this week, but investors are watching for signs of a weakening economy, rising inflation and the war in Ukraine that could weigh on their prospects. Continue reading

In the second quarter, however, BNP’s risk costs — money set aside for defaulting loans — came in at €789 million, about €100 million below analysts’ average forecast.

Activity increased across all businesses, with revenue up 11.1% in the unit home to retail banking and 10.6% in investment banking.

DERIVATIVE DEMAND

As financial markets endured one of the worst first six months in living memory, demand for financial instruments surged, the bank said.

Demand was “particularly driven by switching and hedging needs in rates, FX, emerging market and commodity derivatives products,” it said, adding that there was “overall a good level of activity in equity markets, particularly in derivatives.”

BNP’s revenues from trading in fixed income, currencies and commodities rose 14.8% in the quarter, while revenues from equities trading rose 16.1%.

The French bank’s push to increase market share in the business came under the spotlight last week after Ashley Wilson, global head of prime services, resigned after joining from Deutsche Bank (DBKGn.DE) just a year ago . Continue reading

Noting a slight decline in the key CET-1 ratio to 12.2% from 12.4%, Citi analysts said that while a short-term upside is expected for BNP shares, visibility remains low.

“We expect the market to react positively to these numbers initially, but questions on 2022/23 outlook, asset quality/reserve development, capital trends, sensitivity to macro developments, trend in AM (asset management), growth and return on capital,” they wrote in a note.

($1 = 0.9790 euros)

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Reporting by Julien Ponthus and Matthieu Protard Editing by Tomasz Janowski and Mark Potter

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