(hooly-news.com) – BNP Paribas shares rose 5.13% to 36.145 euros thanks to better than expected results in the second quarter. Over this period, net income group share fell by 6.8% to 2.299 million euros, clearly exceeding the consensus of 1.46 billion euros. The cost of risk increased by 826 million euros to 1.447 billion euros and stood at 65 basis points of outstanding customer loans. The bank increased provisioning for expected losses to the tune of 329 million euros. These provisions are lower than expected.
The group’s results also benefited from a positive jaws effect, with revenues growing faster than costs.
The group’s operating expenses fell by 1.3% to 7.34 billion euros, while those of the operating divisions increased by 0.2%. As announced in the framework of the 2020 plan, the exceptional transformation costs are zero; they amounted to 222 million euros in the second quarter of 2019.
Net banking income rose 4% to 11.675 billion euros. In the operational divisions, net banking income increased by 5.2%.
The good results can be explained by the good performance of corporate and investment banking. The CIB recorded a 33% jump in revenues to 4.12 billion euros and 50% in taxable profit to 1.59 billion. The market expected only 840 million.
Within the division, the FICC businesses (rates, credit, foreign exchange and commodities) stood out with revenues leaping 153.8% to 2.013 billion. In contrast, equity brokerage income fell 52.8% to 290 million due to the residual impact of dividend restrictions in Europe and lower volumes in Prime Services.
As of June 30, 2020, the hard equity ratio (CET1) stood at 12.4%, up 40 basis points compared to March 31, 2020 due in particular to the organic generation of capital for the quarter. It takes into account a 50% payout rate. The market was targeting 11.9%.
Finally, BNP Paribas has reaffirmed its forecast of a drop in net income group share of 15 to 20% this year.
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Key points to remember for BNP Paribas
– Net banking income of € 44.6 billion generated by the RBS branch of domestic banks and financial services on the one hand, and by the investment bank CIB on the other;
– 90% commitments in “rich” countries: France for 30%, Belgium & Luxembourg for 13%, Italy for 10%, Germany for 4%, other European countries for 17%, North America for 14%, Asia- Pacific for 6%;
– Business model based on synergies and cooperation between business lines, on operational innovation and for clients and on risk diversification;
– Capital held by the Belgian State (7.1%), the Grand Duchy of Luxembourg (1%) and employees (4.2%), with a board of directors of 14 members chaired by Jean Lamierre, Jean- Laurent Bonnafé being general manager;
– Solid financial position with a CET 1 ratio of 12.1%, liquidity of € 309 billion giving 12 months of visibility.
– Growth strategy being redefined after the 2020 plan;
– One of the lowest cost of risk in the banking sector and resistance to stress tests of 1.94 against 3.08 for the average of European banks.
– Innovation strategy best rated by the digital rating agency D-Rating. Internally: support for intrapreneurs (Lux Future Lab, People’sLab4Good, Bivwak), sustained growth of the Hello Bank! Online bank. Partnerships: global Plug and Pay platform for accelerating start-ups;
Environmental strategy aiming to become world No. 1 in sustainable finance:
– already 3rd in the world in green bonds, number 1 in Europe for financing renewable energy projects, hence the bank’s good ranking by extra-financial agencies,
– support of € 60 million for start-ups in the energy transition;
– end in 2030 of the financing of companies linked to coal in Europe and in 2050 elsewhere.
To be continued
– Bank valuation from 7 points: liquidity positions, ability to meet the so-called “Basel 3” solvency ratio equal to 9% of equity, control of investment banking commitments, centralization of derivative clearings and, finally , decisions of central banks – Fed and ECB -, cost of risk, and return on equity or ROE;
– Net assets per share of € 69.7, compared with the stock market price;
– After the presentation, on March 17, 2020, of the bank’s forces, awaiting an assessment of the impacts and risks associated with the pandemic;
– Rating of the debt placed under negative suspension by Standard & Poor’s;
– Suspension of the 2019 dividend (expected at € 3.10), at least until October 1, 2020, and of the 2020 dividend.
Finance – Banks
Life is hard for European banks! The latter are first subject to very strict regulation, which imposes on them capital and liquidity constraints (Basel III). American banks, which do not have these constraints, generate higher margins and dominate the lucrative niche of investment banking. In addition, low or zero interest rates weigh on profitability. In addition, there is competition from Fin Tech and Gafa. Moreover, large establishments are buying fintechs to counter this technological threat. But the fight against Facebook and Google, which offer free services by paying for the use of payment data, promises to be very complex.
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