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Bloomberg
BNP Paribas SA joined Deutsche Bank AG in reporting steep third-quarter declines at its debt-trading business, complicating Chief Executive Officer Jean-Laurent Bonnafe’s plans to meet 2020 profit and growth targets.
The French bank posted a sixth consecutive quarterly contraction in revenue from buying and selling bonds, currencies and commodities, while gains from equities trading were also lower than analysts had expected. The global markets business had its second-worst quarterly revenue since early 2016.
Europe’s top banks are struggling to deliver revenue growth amid record low interest rates, while the prospects of a trade war and Italy’s budget woes are depressing client activity. While Barclays Plc stunned investors with trading growth above Wall Street levels last week, BNP Paribas said client business in rates and foreign exchange stayed weak last quarter.
“Revenue growth has clearly been more challenging than what they had initially expected,†said Jonathan Fearon, who helps manage some $19 billion worth of European equities at Aberdeen Standard Investments. “There is more margin pressure around and the markets business hasn’t had the jump that they would have hoped for despite lots of investments in growth.â€
BNP shares declined as much as 4.6 percent in Paris and were trading 3.1 percent lower at 46.00 euros as of 11:25 am local time. The stock has lost about a quarter of its value this year, roughly in line with a sector punished by low interest rates and a revival of political uncertainty in the euro zone.
BNP’s performances are disappointing investors less than nine months after the French company said it may exceed its 2020 return-on-equity target. Now, with most of 2018 over, some key metrics are looking increasingly challenging. Over the first nine months, return on equity — a measure of profitability — fell to 9.5 percent from 10 percent a year earlier. Total revenue dropped 0.8 percent, a far cry from BNP’s target for annual growth of at least 2.5 percent.
A rebound in French retail banking revenue will start this quarter and continue next year, Chief Financial Officer Lars Machenil said in an interview on Bloomberg Television. Even so, he struck a relatively cautious tone on the outlook for the corporate and institutional banking unit.