May 3, 2017 / 2:54 PM / 3 months ago

UPDATE 1-BNP Paribas sees CIB bounce back

4 Min Read

(Adds comments from chief operating officer)

By Christopher Spink

LONDON, May 3 (IFR) - A strong recovery in equities trading enabled BNP Paribas to report a 20% rise in revenues at its corporate and institutional banking division, in line with US peers and better than many European rivals, which reported weaker figures last month.

"In global markets there was a general rebound in activity, more so among US banks than European ones," said Philippe Bordenave, chief operating officer at BNP Paribas. "We have been gradually gaining market share in each quarter."

First-quarter CIB revenues were €3.22bn compared with €2.69bn in the same period a year earlier when the French bank reported a 41% fall in equities revenues to €428m. This time that bounced back by 36% to €580m, which is still below the €725m level recorded two years ago.

The group’s larger fixed income, currencies and commodities arm also recovered, with revenues surging by 32% to €1.17bn, roughly the same level as two years ago. Like others, BNP Paribas has benefited from strong activity in rates. It also said FX was “good”, unlike in some banks.

The lender differs from most others by also including fees from primary debt capital markets in this division. That has been strong across all banks, in comparison with the unusually weak period seen a year earlier.

BNP Paribas’ dominant euro-business also benefited from the European Central Bank’s corporate bond purchasing programme, which has encouraged many major issuers to come to market before any possible monetary policy changes.

The bank has outlined plans to reduce annual costs by €900m in its CIB division over the next three years so cost-to-income is 64% by 2020. Over this quarter overall divisional expenses went up 11% to €2.51bn, which was smaller than the top line increase.

However, that still meant cost-to-income was 77.8%, leaving management with much to do to meet its target. The bank said the CIB had incurred €43m of one-off “transformation” costs in the quarter. As part of this it sold a sub-profitable €2.5bn portfolio of positions.

The bank is also looking to expand in some financing areas. For instance, last quarter it announced the acquisition with French carmaker PSA of General Motors Europe's financing activities, paying €450m for a 50% share of the book, which had €9.6bn outstanding at the end of 2016.

“We are looking to develop our car financing business as it is an area where we are underdeveloped compared to other areas of consumer finance,” said Bordenave.

Nearly half of CIB’s revenues come from resilient businesses – securities services and corporate banking. The former saw revenues rise 8.5% to €478m year-on-year, benefiting from new contracts such as looking after €60bn of assets for Spanish insurer Mapfre.

In corporate banking, BNP Paribas remains a dominant syndicated loan arranger in Europe. Volumes here rose 7.2% year-on-year to €135.3bn. In transaction banking the group is still winning business from a deal to take on RBS clients after the UK bank pulled out of this area. Revenues across corporate banking went up 6.7% to €991m. (Reporting by Christopher Spink)

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