Investment banking and loan demand help BNP Paribas exceed expectations

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Rising trading revenue at its investment bank and growing demand for corporate loans helped BNP Paribas beat its second-quarter profit forecast.

Its overall revenue in the period rose 8.5% to €12.78 billion, beating the €12.38 billion average expected in a Refinitiv analyst poll. Net profit was 3.17 billion euros, up 9.1% year-on-year and beating the forecast of 2.65 billion euros.

The euro zone’s biggest bank has expanded its equity business with acquisitions in recent years and is reaping the benefits in its investment bank. It has also been working to win new customers, especially large corporations, by expanding its lending across the EU during the pandemic.

Corporate and investment banking revenue rose 10.6% to 4.1 billion euros, despite a slowdown in transactions and IPOs during the period. BNP’s overall loan portfolio, which is geared more towards small and large businesses than households, grew 8.1% in the second quarter.

BNP shares were up almost 3.4% in morning trading.

Rising interest rates have raised concerns that consumers could delay taking out mortgages, for example, with a ripple effect for banks, although France’s central bank said that up to present, there was little evidence of this in France.

BNP’s overall cost of risk is lower than a year ago and it has released certain provisions made to deal with the pandemic. But it set aside 511 million euros in provisions for expected losses from the fallout from Russia’s invasion of Ukraine, rising inflation and interest rates.

“Results have not shown any weakness so far due to the environment,” said DBRS Morningstar analyst Arnaud Journois. The new arrangements, however, showed that “the outlook is not as good as it used to be”, he added.

BNP saw good momentum in its personal and commercial banking units in its home market and others like Belgium in the second quarter, while its car leasing business Arval – an area where rivals like Societe Generale are growing also – also performed well.

In investment banking, BNP Paribas said its capital markets revenue fell 25.5% year-on-year in the Europe, Middle East and Africa region, but added that its revenues from mergers and acquisitions had increased further.

In Europe and the United States, transactions have weakened this year compared to a booming 2021 and quotes have collapsed as fears of recession and the war in Ukraine fueled volatility in stock markets.

BNP’s revenue from bond and currency trading was up 15% year-on-year and 16% in equity trading. The group has expanded its operations with acquisitions, such as Deutsche Bank’s recently integrated prime brokerage business, which serves hedge funds.

The bank agreed late last year to sell its U.S. Bank of the West operations for $16.3 billion, a deal expected to close in late 2022 that has raised expectations for additional smaller acquisitions. scale in areas such as payment systems.

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