BNP Reports Increase in Profit on Investment Bank

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BNP Paribas SA, France’s biggest bank, reported higher first-quarter profit as the euro’s decline helped boost earnings at its corporate and investment bank.

Net income rose to 1.65 billion euros ($1.85 billion) from 1.4 billion euros a year before, the Paris-based bank said on Thursday. Earnings beat the 1.38 billion-euro average estimate of eight analysts surveyed by Bloomberg.

Increased income from buying and selling bonds and stocks, together with the euro’s slump to a 12-year low against the dollar, fueled an 88 percent surge in pretax earnings at the investment-banking division. Even so, shares gyrated as revenue slumped at the French consumer-banking business and the bank failed to increase a key measure of capital.

“This shows you have no room for error,” said Cyril Meilland, an analyst at Kepler Cheuvreux in Paris, who recommends buying BNP shares. “Disappointments came from revenues in French retail and from the capital level, even if there was a beat especially in corporate and investment banking.”

BNP fell as much as 3.4 percent, the biggest intraday decline since Feb. 9, and was 0.8 percent lower at 56.54 euros by 11:24 a.m. in Paris trading. The stock has climbed 15 percent this year.

Pretax earnings from corporate and investment banking rose to 1.13 billion euros from 600 million euros a year earlier. Revenue from equities trading gained more than 23 percent while fixed-income sales climbed by more than 31 percent, buoyed by the weaker euro.

Goldman, Deutsche

The first quarter marked a trading revival as securities firms around the world benefited from increasing volatility and rising equity markets. The Euro Stoxx 50 jumped 18 percent as the European Central Bank started a bond-buying program, known as quantitative easing, to stimulate the economy.

Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. posted revenue gains of more than 20 percent in the first quarter from a year earlier, the biggest increase since at least the final quarter of 2009. Deutsche Bank AG’s investment bank boosted revenue 15 percent in the quarter.

Meantime, pretax profit at BNP’s French consumer-banking unit fell 3.4 percent to 424 million euros in the first quarter. Net interest income, the difference between the revenue generated from lending and the interest paid out on deposits, shrank by 3.5 percent as the low rate environment led to more mortgage refinancings.

Not Rewarded

BNP’s key capital ratio under Basel 3 rules was at 10.3 percent at the end of March, unchanged from December. The leverage ratio, or capital as a proportion of total assets, fell to 3.4 percent from 3.6 percent in December because of “a very significant foreign exchange effect,” BNP said.

“In an environment of renewed capital concern for large banks, peers who have beaten on trading but missed on capital have not been rewarded,” Jon Peace, an analyst at Nomura Holdings Inc. in London with a neutral rating on the stock, said in a note.

BNP made a 245 million-euro contribution to the Single Resolution Fund in the quarter. New rules and higher taxes, including contributions to the euro region’s bank rescue fund and single supervisory mechanism, will trim BNP’s return on equity -- a key measure of profitability -- by about 70 basis points in 2016, the company estimated in February.

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