BNP Paribas cushions profit fall with rates trading, retail boost
Overall, it was a somewhat mixed quarter for the euro zone's largest bank by assets, as signs of a revival in its domestic retail unit were offset by underwhelming performance at its investment bank, which lagged Wall Street rivals.
Yet, the bank signalled that the much-expected rebound in its European retail activity was set to continue in the second half.
"Outlook for the second half of the year is very encouraging, with expected revenue acceleration driven by Commercial & Personal Banking," Chief Executive Officer Jean-Laurent Bonnafe said.
BNP is among the first of the big European banks to publish second-quarter numbers.
Net income in the April-to-June period fell 4% from a year earlier to 3.26 billion euros ($3.83 billion), slightly above analyst forecasts. Revenue rose 2.5% to 12.6 billion euros, in line with expectations, while provisions for bad loans matched estimates.
At its investment bank, fixed income, currency and commodity trading revenues soared 27% on the back of market volatility sparked by U.S. President Donald Trump's tariffs, but equity trading revenue suffered a steep decline and pre-tax income from global banking fell. Overall investment banking revenue was up 4% year-on-year.
The global banking activity, which serves large corporate clients and financial institutions, was impacted by trade tensions, geopolitical uncertainty, and a weaker dollar.
Several analysts saluted the bank's lower-than-expected costs and the rebound in its retail operations.
"Revenue performance in European retail was a standout and sets up well for H2 25 acceleration," Jefferies said in a note to clients. "Elsewhere, the group exhibited strong cost control."
CEO Bonnafe, whose tenure was recently extended, has made the investment bank a key part of his efforts to boost BNP's profits, while also cutting costs and bulking up in asset management with the recent acquisition of AXA Investment Managers.
The bank's shares have underperformed rivals, however, and even this year's 22% gain is behind the wider European banking sector (.SX7P), opens new tab, with investors cautious about BNP's relative growth prospects.
BNP said its average tax rate for the quarter was nearly six percentage points higher than a year ago, following changes to U.S. tax rules on financing expenses. That weighed on net earnings, with pre-tax income up 3.1%.
Earnings from BNP's insurance operations rose sharply, driven by solid operating income and a one-off gain related to a financial stake in China.
BNP's retail and consumer division saw a 4.3% rise in net interest income (NII) in France. Analysts expect further improvement following a recent cut in the regulated rate on the country's popular Livret A savings account, which offers room for margin expansion.
French banks typically lag their Spanish and Italian peers in benefiting from higher interest rates, as 96% of French mortgages are on a fixed rate. Tighter mortgage rules and popular regulated savings products have squeezed margins in an already highly competitive market.
BNP announced an interim dividend of 2.59 euros per share, to be paid on September 30, mirroring a common U.S. practice.
The bank also said it expected to surpass 12.2 billion euros in net income this year, in line with its 2024-2026 targets.
($1 = 0.8503 euros)
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