PARIS — French bank BNP Paribas plans to expand in Germany, Europe’s biggest economy, after cost cuts failed to stem sliding quarterly earnings in flagging markets like Italy.
The euro zone’s biggest bank by market value will hire up to 500 staff and increase its annual revenue from German operations to ₣1,5 billion ($1,99 billion) from ₣1,1 billion.
Germany is the euro zone’s biggest market and one of its most resilient economies, even though recent data has been mixed, with the private sector expanding and unemployment falling, but industrial data and exports weakening.
BNP will use its new online bank, “Hello Bank”, to gather deposits from retail customers. Germany’s retail banking market is dominated by Deutsche Postbank and Commerzbank, while a few foreign banks, including ING, have a limited presence.
It will also ramp up its existing corporate and investment banking services, such as cash management and bond issues.
The timing may prove right as top lender Deutsche Bank cuts back on risk and as other local banks restructure.
“BNP is really under-represented in Germany. There is potential for them in segments like small-to-medium-sized export businesses, particularly towards Asia, or in providing financial services to local savings banks,” said Jean-Pierre Lambert, analyst at Keefe, Bruyette & Woods.
BNP derives more than half its annual revenue from its French, Italian and Belgian markets. But the euro zone’s economic problems are pushing the bank to chase growth in Asia and the United States, as well as Germany, while stepping up cost savings.
Although cost cuts helped bring expenses down in the second quarter, they were not enough to avert a 4,7% drop in quarterly net profit to ₣1,76 billion ($2,33 billion) due to rising provisions for bad loans in Italy and weakness at its investment bank. BNP’s revenue fell 1,8% to ₣9,92 billion.
Analysts had expected ₣1,51 billion in net profit and ₣9,84 billion in revenue.
BNP Chief Operating Officer Philippe Bordenave told Reuters Insider there were signs of improvement in Europe, but that they would only fully become visible in the second half of 2013.
Commenting on the outlook for loan-loss provisions, he added: “We are relatively confident as far as France and Belgium are concerned . . . in Italy, it may be somewhat more difficult.”