BNP Paribas starts the year in a strong way

Le groupe BNP Paribas maintient, malgré la guerre en Ukraine, ses objectifs financiers pour 2022.

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The results of BNP Paribas in the first quarter are in line with the bank’s image: stable. Very sturdy too. They exceed by half the forecasts of financial analysts.

It is the power of investment and bank financing, a brick-and-mortar war machine built by Paribas’s acquisition in 1999, that drives the results. Overall, the group seems to be surfing in a context that has become particularly bleak since the outbreak of war in Ukraine on February 24 and the shift in monetary policy towards inflation.

Devaluation in Ukraine

The quarterly net result of 2.1 billion euros (+ 19% on an annual basis, -9% compared to the record of the previous quarter) takes into account many exceptional elements, but which are canceled out. In particular, the group liquidated 90% of its banking subsidiary in Ukraine, Ukrsibbank, which is 60% owned, which represents an exceptional burden of 159 million euros.

Of the 300 branches of this bank in Ukraine, about 200 are currently closed due to the war. The bank has no real presence in Russia, except for an investment banking subsidiary, BNP Paribas ZAO, which went on hold in late March.

During the quarter, revenues increased by 11.7% to € 13.2 billion and expenditures by 12.3%, representing a slight deterioration in the cost / revenue ratio. This slippage in costs is explained, according to the bank, by its strong contribution to the European deposit protection mechanism, which is calculated according to the amount of deposits.

60% jump in shares and primary

Analytically, if retail banking and financial services are doing well (+ 8.5% to 7 billion), especially in France, and account for more than half of turnover, it is indeed investment banking income that has soared by 28% (to 4.7 billion) to account for 35% of net banking income (and almost 70% of quarterly turnover growth or 50% of operating profit growth).

Market activity, both in interest rates and in equities, has performed particularly well, despite (or thanks to) a significant increase in volatility. Thus, revenue from stock transactions and “high quality service” (alternative fund services) jumped 60% to 1.1 billion euros. Once again, BNP Paribas is taking full advantage of the withdrawal of some of its competitors. This is what happens with these activities premium servicesa very lucrative segment (but very risky if not well controlled) for which Deutsche Bank and Credit Suisse recently threw in the towel.

Maintaining financial goals

As for the provisions, they are still almost non-existent, “Twice lower than expected”, even the stockbroker Jefferies notes, thanks in particular to a significant acquisition in the American subsidiary Bank of West. This Californian subsidiary is in the process of being sold to the Canadian banking group BMO for a price of about 15 billion euros (1.7 times the net assets). This company, which was announced at the end of December for a closure expected by the end of the year, should lead to a capital increase of 2.9 billion euros.

Unsurprisingly, the first bank in the euro area confirms its financial targets for 2022 and 2025, which were presented last February during the presentation of the strategic plan.

“Good trade momentum at the beginning of the year consolidates our course for the year”, the bank said in a statement. To do this, it must curb its costs – and avoid wage pressure in a period of high inflation – because the economic slowdown in the eurozone indicates less robust quarters. These results were welcomed in the stock market in the morning, while the bank’s capitalization still shows a 40% discount on its net assets.