Posted on Jul 30, 2021 at 7:01 am
Back with a bang for BNP Paribas. Like the French giants of the CAC 40, which have on the whole benefited from the recovery of the economy, the leading bank in the euro zone saw its quarterly net income, group share, jump 26.6% over one year to 2.9 billion euros.
With 4.67 billion in net income already acquired over the first six months of the year, the establishment is in a good position, if it maintains this pace, to exceed its performance of the last two years. “BNP Paribas’ results are solid and reflect the rebound in activity and our growth potential,” said Jean-Laurent Bonnafé, CEO of BNP Paribas.
Return to pre-crisis levels
The performance gap is explained by a significantly lower cost of risk in the second quarter than in the same previous quarter. These provisions are passed through the bank to deal with unpaid loans: they amounted to 1.4 billion euros in the second quarter of 2020, against 813 million a year later.
But it is in fact over two years that the performance is both more impressive and more telling: the banking group manages to beat its net income group share for the second quarter of 2019 by 17.9%, so before the outbreak of the health crisis due to the Covid epidemic. This time, the variation in the cost of risk is not taken into account: the explanation is to be found on the side of revenues which increased by 552 million euros (+ 4.9% over the period), the net banking income (GNP) amounting to 11.7 billion.
Generate more commissions
Each business contributes in its own way to this growth in net banking income, BNP Paribas being designed so that from one quarter to the next each entity can take turns taking the wind, depending on the economic situation. The group also believes that it is crystallizing market share gains, particularly in the financing of large companies.
In the second quarter, the first source of income was in the “Domestic Markets” division, the entity which notably covers the networks in France, Italy, Belgium and Luxembourg. There is a “strong growth in revenues driven by a sharp rebound in the networks (especially in France) and very good growth in specialized businesses (especially Arval)”, notes the group.
This not only suggests that the bank has been riding strong demand for credit, both from households and businesses, but also that it has generated more commissions, indicating a shift in its business model. The retail banking in France rebounded very strongly, to a pre-tax profit of 377 million euros this quarter (+ 78.2% over one year), exceeding the Belgian nugget which released, it, 317 million.
Brake on “fixed income”
Corporate and investment banking (CIB) has more contrasted fortunes between its three branches. While posting generous results (1.63 billion euros), up 3.2% last year and even 54% compared to 2019.
Unsurprisingly given the needs of investors this quarter, market activities slowed down. In particular, from one year to the next, revenues decrease by 43% in “fixed income”, “after an exceptional context in the second quarter of 2020”, recalls the group. As for corporate banking, it remains driven by its good commercial performance, as does the custody of securities.
Target confirmed for dividends
For its part, the International Financial Services (IFS) division saw its pre-tax results increase by 20% over one year (to 1.15 billion euros), but its revenues fell by 2%, mainly due to the effects unfavorable exchange rates, as income from this branch is not generated in euros in some cases. The “Mediterranean Europe” branch (which includes Poland and Turkey) bears the brunt of this, with pre-tax income of € 80 million, down 34.2%. In addition, inflows remain strong in the savings and asset management businesses, also under the IFS umbrella.
In total, a few hours before the unveiling by the European Central Bank (ECB) of the results of its new stress test on banks, BNP Paribas is showing its serenity and confirms its intention to pay a new dividend to its shareholders on September 30. Enough to achieve a payout rate of 50% of its 2020 results.