BNP Paribas Profit Drops as Investment Banking Revenues Fall

French lender BNP Paribas came in short of profits and revenues for the first quarter on Friday, as higher market volatility failed to bolster performance in its investment banking unit.

France’s largest bank generated profits of €1.57 billion ($1.88 billion) in the first three months of the year, falling by 17 percent from last year’s €1.89 billion, but still surpassed analysts’ expectations of €1.55 billion.  

Operating income was at €1.92 billion ($2.3 billion), versus €2.58 billion in the same period in 2017.

BNP Revenue Fall Behind Despite Higher Market Volatility

The declines came as overall revenues dropped 4.4 percent to €10.8 billion ($12.93 billion), against €11.30 billion in the first quarter of the previous year.

Revenues at its corporate and institutional banking (CIB) business lost 9.8 percent, as it struggled with a subdued market, compared to a strong first quarter a year ago.

BNP CIB head Yann Gérardin stated earlier this year that he was hoping the recent surge in volatility would mean a better 2018 than 2017, but it resulted in a wait-and-see attitude by fixed income, currencies, and commodities clients instead.

Following the results, shares of BNP Paribas were down by 1.4 percent to €62.46 on Friday, as its revenue performance disappointed the market. 

Negative impact from a stronger euro, weak market conditions, and a high comparative base in the first quarter, when a huge amount of corporate banking fees were booked, also hindered earnings growth, according to BNP Paribas.

Still, chief executive Jean-Laurent Bonnafe said even if the market context was lackluster in Europe compared to the same quarter in 2017, the results remained on track towards their 2020 plan and the achievement of their targets.

The Paris-based company is currently carrying out a three-year plan that intends to boost profitability by reducing its physical branch network and investing more in digital services on both investment banking and retail banking business.

BNP Paribas also aims to become one of the top three European investment banks, partly by expanding in Germany, the US, and Asia as competition slims down.

Quarterly revenue at its international financial services division rose by 3.8 percent. BNP Paribas considered the unit, which includes consumer finance, retail banking in emerging markets and the US, as well as insurance and wealth management as its ticket to growth.

This helped offset BNP Paribas' shortcomings in its home market, where it saw revenues plunged 1.6 percent, partly because of pressures on its loan businesses.

Revenue from equity and prime services at the bank added 19.4 percent, but fixed income (FICC) activities fell by 31.4 percent.

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