Europe can still build investment-bank champions, says BNP

Bloomberg

BNP Paribas SA is showing
it’s still possible to build a
big investment bank franchise from Europe.
France’s largest lender outshone Germany’s Deutsche Bank AG and much of Wall Street for another quarter, posting a standout performance in equity derivatives to help drive better-than-expected profit. Among bright spots: Equity and prime services revenue jumped 26 percent amid surging demand for derivative products.
Jean-Laurent Bonnafe, BNP Paribas’s chief executive officer, is one of the few European bosses investing to build investment-bank revenue as he aims to make France’s largest lender one of the top three trading and corporate-banking players across the continent. Long a leader in equity derivatives and structured products, BNP is targeting Deutsche Bank’s home turf in Germany, as well as the UK, US and Asia.
Second-quarter profit was $2.8 billion, the Paris-based bank said, surpassing the 1.91 billion-euro average estimate of six analysts compiled by Bloomberg. Provisions for bad debt fell.
The shares fell 0.6 percent to 65.62 euros as of 10:31 a.m. in Paris and have gained about 8.4 percent this year. Deutsche Bank is little changed this year, and London-based Barclays Plc is down about 7 percent.
Investment banking “has been doing very well,” Chief Financial Officer Lars Machenil said in an interview with Bloomberg Television. “It’s good results and which allowed us to continue to capture market share.”
Fixed-income, commodities and currencies revenue fell 16 percent from the year-earlier quarter, BNP said, citing “low business activity in all the segments” compared to more favorable environment a year earlier. But, thanks to the performance in equity derivatives, overall revenue from BNP’s global markets division fell only 2.3 percent to 1.52 billion euros, just above the 1.47 billion-euro average of analysts surveyed by Bloomberg.
Bonnafe, 56, in March set a goal for return on equity of 10 percent at BNP Paribas in 2020, with its common equity Tier 1 ratio targeted to reach 12 percent. In the global-markets division, BNP Paribas wants to increase revenue by about 5 percent annually through 2020.