Fixed income trading slump sends BNP Paribas shares lower

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PARIS — A 36% slump in pre-tax income at BNP Paribas’s global markets business overshadowed a rise in its third-quarter profit yesterday, knocking the shares of France’s biggest bank.

Revenues from fixed income, currencies and commodities (FICC) fell 26%, worse than the average 22% decline at United States rivals, though better than the 30% plus drops at European peers such as UBS, Deutsche Bank and Barclays.

Major declines in bond trading revenue have hit investment banks due to reduced client activity and low market volatility compared with a year ago, when Britain’s vote to leave the European Union and the US election led to market turbulence.

Cost cuts and the sale of a stake in Indian insurance company SBI Life helped BNP to post an overall 8% rise in quarterly net profit to 2,04 billion euros ($2,38 billion), above the 1,9 billion euros expected by analysts.

“BNP Paribas reported in the third quarter good business development in an improved economic environment in Europe,” the bank said in a statement. “However, the market context this quarter was unfavourable for the market activities”.

Overall revenues fell 1,8% to €10,39 billion in the quarter, below the €10,6 billion expected by analysts. Revenues were also hit by adverse foreign exchange movements.

“Revenue miss driven by poor CIB likely to trigger profit taking,” said a Paris-based trader, referring to BNP’s investment banking business.

BNP shares were down 3% in early trading, among the worst performers on France’s benchmark CAC-40 index and underperforming a 0,4% decline on the STOXX Europe 600 banking index. The stock remains up around 10% since the start of 2017.

BNP, which had outperformed many of its rivals in recent quarters in bonds and equity trading, said its FICC business had maintained its leading position in bond issuances since the start of the year.

The bank cut operating expenses at its corporate and institutional bank by 6,2% in the quarter, part of a savings drive launched at the start of 2016. It also identified 200 processes that would be automated by the end of 2018.—Reuters