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BNP Paribas profits rise after asset sale, but revenues sink amid weak fixed-income trading

  • French bank BNP Paribas posted forecast-beating third-quarter earnings Tuesday with net profit seeing an 8.3 percent rise from the same period last year.
  • Group revenues at the bank totaled 10.3 billion euros, down 1.8 percent year-on-year due to an unfavorable exchange rate, the bank said.
  • The bank's chief financial officer (CFO) told CNBC that the earnings reflected a challenging environment for certain parts of the bank.
The logo of BNP Paribas SA sits outside a branch of the bank in Paris, France.
Balint Porneczi | Bloomberg | Getty Images
The logo of BNP Paribas SA sits outside a branch of the bank in Paris, France.

French bank BNP Paribas posted forecast-beating third-quarter earnings Tuesday with net profit seeing an 8 percent rise from the same period last year.

Here are the highlights:

  • Net income up 8.3 percent at 2.04 billion euros ($2.37 billion), versus Reuters poll of 1.91 billion euros
  • Revenue down 1.8 percent to 10.39 billion euros, versus Reuters poll of 10.6 billion euros
  • Third-quarter costs down 1.2 percent to 7.13 billion euros, compared to a year ago

Earnings were boosted by the sale of a stake in Indian life insurance company SBI Life which led to a 326 million euro capital gain for the bank.

However, group revenues at the bank totaled 10.3 billion euros ($11.9 billion), down 1.8 percent year-on-year, due to an unfavorable exchange rate, the bank said.

It also reported a weak performance at its corporate and institutional banking (CIB) division against what the bank called "unfavorable" market conditions. There was also a steep drop in revenues at its fixed income division.

The bank's chief financial officer (CFO) told CNBC that the earnings reflected a challenging environment for certain parts of the bank.

"It's only the fixed income which has been relatively challenging this quarter," Lars Machenil said.

"Maybe this challenge came from uncertainty, people waiting to do investments or whatever depending on how things would clarify. So one could assume that now going forward the elements will clarify somewhat and therefore that fixed income will pick up further. So that is what we'll have to see."

Cost cutting

Like many of its European rivals, BNP Paribas has undergone a restructuring and cost-cutting process and in the last quarter those processes were starting to bear fruit.

In the second quarter, the bank reported net income and revenues above estimates from analysts polled by Reuters, equating to a 17.2 percent annual jump in net income (excluding exceptional items).

In the third quarter, the bank said it had succeeded in reducing costs and bolstering its common equity tier 1 capital (CET1) ratio — a key measure of a bank's ability to withstand financial shocks — in the three months to the end of September, to 11.8 percent.

Machenil told CNBC that the bank would continue to cut costs.

"We already launched a plan last year, to reduce cost in CIB through digitalization and the likes. That is what we see that is why the costs are really strongly reducing. That's positive. At the same time we still want to accompany our clients in growth, which is what we do. We do it in corporate banking, in security services, in equities."