PARIS: A surge in foreign money and commodity buying and selling within the third quarter helped to place BNP Paribas on observe to beat its earnings steerage for 2020 regardless of a squeeze on margins from low rates of interest.
Bumper buying and selling volumes have helped many main European banks to supply stronger-than-expected third-quarter earnings and a few additionally now have a extra optimistic outlook on mortgage losses brought on by the monetary fallout from COVID-19.
The banks’ third-quarter efficiency will turn into an necessary gauge of monetary power forward of December when the European Central Financial institution is predicted to revisit its suggestion for euro zone banks to not pay dividends.
BNP Paribas mentioned that its capital cushion, its widespread fairness tier one ratio, was up by 20 foundation factors at 12.6% at end-September, which took under consideration a 50% dividend pay-out ratio.
Analysts at Jefferies mentioned all of the financial institution’s divisions had been both in line or forward of consensus.
BNP Paribas shares had been up by 6.5% at 0849 GMT.
Income at BNP Paribas’ company and institutional financial institution rose by 17.4%, whereas fixed-income buying and selling income jumped by 36% “with a superb degree of shopper exercise on the speed and foreign exchange markets.”
5 European funding banks on common produced a 26% improve in fixed-income buying and selling income within the quarter, primarily based on Reuters’ calculations.
Bond and fairness underwriting income helped to spice up the outcomes, as corporations tapped the markets to strengthen their steadiness sheets.
BNP Paribas reported quarterly internet revenue of 1.89 billion euros ($2.20 billion), down 2.3% from the identical interval a 12 months in the past. Income was broadly flat at 10.89 billion.
Analysts had forecast internet revenue nearer to 1.57 billion euros and income nearer to 10.66 billion, in response to the IBES estimate from Refinitiv.
“BNP Paribas demonstrates its excessive resilience due to its monetary solidity, its diversification, and the facility of execution of its platforms,” chief government Jean-Laurent Bonnafe mentioned in an announcement.
BNP Paribas, which has a 2.6 trillion euro steadiness sheet that’s largely uncovered to Europe, mentioned the financial restoration was gradual within the third quarter with momentum differing from one area or sector to a different.
Its price of threat, which displays provisions for loans that will flip bitter, was up year-on-year by 47% to 1.24 billion euros, however got here in decrease than within the second quarter and was beneath analysts’ expectations.
The financial institution’s internet revenue within the first 9 months was down by 13.4%, working forward of its full-year revenue steerage of minus 15% to twenty% which the financial institution left unchanged.
European banks are struggling to deal with report low rates of interest, which cuts into revenue from lending. BNP Paribas’ internet curiosity revenue, which broadly displays the distinction between income from curiosity charged on a mortgage and the price of holding a deposit, fell 5.5% within the third quarter in its French retail enterprise.
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