(Bloomberg) -- BNP Paribas SA’s equities traders for the first time ever made more money than their fixed-income colleagues, highlighting the unit’s growth over the past several years.
Revenue from buying and selling equity derivatives and providing prime brokerage services jumped 57% to €1.15 billion in the period, BNP said in a statement on Wednesday.
The increase was so big, it more than made up for a slight decline in fixed-income trading. It also helped push net income to €3.40 billion ($3.7 billion) in the three months through June, well above the consensus estimate.
The traders for fixed income securities, currencies and commodities typically make much more money for the French bank.
Chief Executive Officer Jean-Laurent Bonnafe has made equities trading a priority in recent years. He has beefed up the unit by taking over businesses and client relationships that rivals including Deutsche Bank AG and Credit Suisse were shedding.
Bonnafe confirmed the bank’s 2024 targets in the statement on Wednesday. He has promised to raise profit to more than €11.2 billion this year.
Fixed-income trading revenue fell 7% in the second quarter. The decline was particularly pronounced in commodities “on the back of lower demand in Europe,” BNP said.
The lender’s shares dropped as much as 1.2% on market open and were trading 0.9% lower at 9:23 a.m. amid a broader decline in equity markets.
Deutsche Bank, which also reported results on Wednesday, posted a 3% revenue decline at its fixed-income unit. The largest Wall Street banks notched an average increase of 5%.
BNP’s shares have been lagging the broader European sector since the beginning of the year, partly because the lender previously cut some of its mid-term targets. The bank’s stock has also suffered from political uncertainty in France, triggered by President Emmanuel Macron’s decision to call snap elections.
The bank sustained a €45 million hit from inflation hedges at its French retail unit. The impact will be “vanishing” in the current quarter, it said.
What Bloomberg Intelligence Says
“BNP Paribas consensus-topping 58% surge in equities trading revenue — far outshining the expected 6% lift vs. 2Q23 and US peers’ aggregate 17% rise — drove a 12% rise in investment bank revenue, underpinning the unit’s lead vs. European peers. That’s despite a disappointing 7% slip in fixed-income trading (vs. US peers’ 6% rise). French retail remains a drag (revenue fell 10%), while expenses and cost of risk matched expectations, limiting upgrade scope.”
— Philip Richards, BI Senior Industry Analyst
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Revenue from BNP’s Investment & Protection Services unit, home of its asset management and insurance operations, gained 3% to hit €1.47 billion.
The unit is becoming important in Bonnafe’s plan to spend what’s left of the $16 billion that BNP earned when it sold its US unit Bank of the West last year. It has since acquired a stake in Belgian insurer Ageas for about €730 million and bought a 5% stake in French reinsurance firm Scor SE.
The bank is also in talks with Axa SA to explore a tie-up of their asset management businesses, Bloomberg News reported earlier this month.
--With assistance from Donal Griffin.
(Updates with share price movement in eighth paragraph)
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